CA Foundation · Quantitative Aptitude · Mathematics of Finance
A machine bought for ₹1,00,000 is depreciated at 10% per annum on the written-down value (reducing balance) method. What is its book value at the end of 3 years?
The book value is ₹72,900. Under the reducing balance method, the value falls by 10% of the previous year's balance, so it equals ₹1,00,000 multiplied by 0.9 three times, which is 0.729 times the cost. Straight-line depreciation would wrongly give ₹70,000.
- A₹72,900Correct
- B₹70,000
- C₹90,000
- D₹81,000
Explanation
Book value = 1,00,000 × (0.9)^3 = 1,00,000 × 0.729 = ₹72,900. Option ₹70,000 is the straight-line result (10% of original cost each year). ₹81,000 is the value after only 2 years.
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