Question

Purchase Price of Machine Rs. 75,000, Installation Charges Rs. 25,000, Residual Value Rs. 40,960. The SLM Rate depreciation is 14.76% p.a. The useful life of machine is _________.

• A. 6 years
• B. 5 years
• C. 4 years
• D. None of these

Answer 1

The correct option is C 4 years

Solution

Purchase price = Rs 75,000

Installation cost = Rs 25,000

Residual value = Rs 40,960

Depreciation = 14.76% p.a

Calculation of Estimated Useful life:

Depreciation = Cost-Residual Value/Estimated useful life

1,00,000 X 14.76% = 1,00,000-40,960/Estimated useful life

14,760 = 59040/Estimated useful life

Estimated useful life = 59040/14760

Estimated useful life = 4 years.