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Question

The cost of a machine depreciated by Rs. 4,000 during the first year and by Rs. 3,600 during the second year. Calculate its cost at the end of the third year

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Solution

Difference between depreciation of 1st year and 2nd year=40003600=Rs.400

Depreciation of one year on Rs.4000=Rs.400

Rate of depreciation =400×1004000=10%

Let the original cost of the machine be Rs100

Value after one year=Rs.10010%of100=10010100×100=Rs.90

Depreciation during second year=10% of 90=10100×90=Rs.9

When depreciation during second year is Rs. 9 then original cost=Rs.100
When Depreciation during the second year is Rs.3600 then original cost=1009×3600=Rs.40000

Cost of the machine after one year=400004000=Rs.36000

Cost of the machine after second year=360003600=Rs.32400

Depreciation in third year=10%of 32400=10100×32400=Rs.3240

Cost of the machine after third year=324003240=Rs.29160

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