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Straight Line Method(SLM)

Purchase Pric...

Question

Purchase Price of machine 1,50,000, Installation charges Rs. 50,000, Residual Value Rs. 81,920. The annual depreciation under SLM is Rs. 29,520. The useful life of machine is_________.

A

6 years

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B

5 years

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C

4 years

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D

None of the these

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Solution

The correct option is C 4 years
Depreciation in SLM = cost of assets+Installation charges-scrap value/estimated useful life

Here , we dont have value for useful life

29520 = 150000+50000-81920/useful life
29520=200000-81920/useful life
29520=118080/useful life
useful life = 118080/29520 = 4
so, useful life will be 4 years.

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