During every financial year, the value of a machine depreciates by 12%. Find the original cost of a machine which depreciates by Rs. 2,640 during the second financial year of its purchase.

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Solution

Let original value of machine=Rs100

For 1^st year

P=Rs100; R=12% and T= 1year

Depreciation in 1^st year= Rs =Rs12

Value at the end of 1^st year=Rs100 - Rs12=Rs88

For 2^nd year

P= Rs88; R=12% and T= 1year

Depreciation in 2^nd year= Rs =Rs10.56

When depreciation in 2^nd year is Rs10.56, original cost is Rs100

When depreciation in 2^nd year is Rs2,640, original cost=

=Rs25,000

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