Question

Original cost = Rs. 1,26000
Salvage Value = Rs. 6,000
Useful life= 6year
What will be the book value of the asset as at the beginning of fourth year (Under sum of year's digits method)

• A. Rs. 1,03,143
• B. Rs. 40,286
• C. Rs. 45,987
• D. Rs. 99,256

Answer 1

Answer: (B)

Rs. 40,286

Value of asset at the beginning of 4th year:-

= Original cost - depreciation for 3 years

= 1,26,000 - (32,286 + 28,571 + 22,857)

= RS-40,286.

Working notes:-

Sum of the years = 6 + 5 + 4 + 3 + 2 + 1

= 21

Depreciable amount = 1,26,000

Depreciation for 1st year :-

Depreciation = depreciable amount x no. of years remaining

-----------------------------------------------------------------

sum of years

= 1,20,000 x 6

-------------------

21

= RS-32,286.

Depreciation for 2nd year :-

Depreciation = 1,20,000 x 5

---------------------

21

= RS-28,571.

Depreciation for 3rd year :-

Depreciation = 1,20,000 x 4

-------------------

21

= RS-22,857.