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A machine costing Rs.2,00,000 has a useful life of 5 years.The estimated scrap value is Rs.20,000. By using straight line method, the annual depreciation is

Solution

✅ Correct Option: 3

Given Information:

Cost of machine = Rs. 2,00,000

Useful life = 5 years

Scrap value = Rs. 20,000


The straight line method of depreciation allocates an equal amount of depreciation each year over the useful life of the asset.

Annual Depreciation =Original Cost - Scrap ValueUseful Life= \dfrac{\text{Original Cost - Scrap Value}}{\text{Useful Life}}


Total Depreciation == Original Cost −- Scrap Value

Total Depreciation =2,00,000−20,000= 2,00,000 - 20,000

Total Depreciation =1,80,000= 1,80,000


Annual Depreciation =1,80,0005= \dfrac{1,80,000}{5}

Annual Depreciation =36,000= 36,000

Therefore, the annual depreciation is Rs. 36,000.

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