A motorbike costing Rs. 1,25,000 has a scrap value of Rs. 25,000. If the annual depreciation charge is Rs. 12,500, then the useful life of the bike is(by using linear method):
A motorbike costing Rs. 1,25,000 has a scrap value of Rs. 25,000. If the annual depreciation charge is Rs. 12,500, then the useful life of the bike is(by using linear method):
Solution
✅ Correct Option: 2
The motorbike has:
- Original cost = Rs. 1,25,000
- Scrap value = Rs. 25,000
- Annual depreciation = Rs. 12,500
Total depreciation is the total value lost over the bike's entire life:
Total Depreciation = Original Cost - Scrap Value
Total Depreciation = Rs. 1,25,000 - Rs. 25,000
Total Depreciation = Rs. 1,00,000
In linear depreciation method, the asset loses the same value each year.
Useful Life =
Useful Life =
Useful Life = years
Therefore, the useful life of the bike is 8 years.
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