Question

The cost of a machinery having a life span of $5$ years is $Rs.1,00,000$. It has a scrap value of $Rs.10,000$. The amount of depreciation under the sum of digits method in the first year will be:

• A. $Rs.16000$
• B. $Rs.18000$
• C. $Rs.30000$
• D. $Rs.25000$

Answer 1

The correct option is C $Rs.30000$

Using Sum of Digits method:

Adding number of years:1+2+3+4+5=15

Therefore, ($Rs.1,00,000$-$Rs.10,000$) X remaining number of years i.e 5

=$90,000$ X $5$= $Rs.4,50,000$ divide by the sum of digits of the useful life i.e 15=$Rs.4,50,000$/$15$=$Rs.30,000$