Question

If the original cost of a machine is Rs. $170,000$, estimated scrap value Rs. $20,000$, what is the depreciation if production during the first year is $6,000$ and total estimated production during the working life of the machine is $60,000$ units.

• A. Rs. $10,000$
• B. Rs. $15,000$
• C. Rs. $9,500$
• D. Rs. $12,000$

Answer 1

Answer: (B)

Rs. $15,000$

Cost of machine = Rs. 1,70,000; Scrap value = Rs. 20,000;

Depreciation in production during the first year = 6,000 units;

Production units during the life of the machine = 60,000 units

Depreciation rate per unit = (Rs. 1,70,000 - Rs. 20,000)/ 60,000 units = Rs. 2.5

Depreciation of first year = 6,000 * Rs. 2.5 = Rs. 15,000