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If an asset costs Rs. 50,000 with an estimated useful life of 6 years and a scrap value of Rs. 5000. Then by using a linear depreciation method, the annual depreciation of the asset will be:

Solution

✅ Correct Option: 2

Given:

Original Cost = Rs. 50,000

Useful Life = 6 years

Scrap Value = Rs. 5,000


Using the linear (straight-line) depreciation method, the annual depreciation is calculated by dividing the total depreciable amount by the useful life.

Annual Depreciation =Original Cost - Scrap ValueNumber of Years= \dfrac{\text{Original Cost - Scrap Value}}{\text{Number of Years}}


Total depreciable amount:

Total Depreciation =50,000−5,000= 50,000 - 5,000

Total Depreciation =45,000= 45,000


Annual depreciation:

Annual Depreciation =45,0006= \dfrac{45,000}{6}

Annual Depreciation =7,500= 7,500


Therefore, the annual depreciation of the asset is Rs. 7,500.

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