CA Foundation · Quantitative Aptitude · Mathematics of Finance
A machine costing ₹1,00,000 has an estimated scrap value of ₹20,000 after 5 years. Under the straight-line method, what is the book value at the end of the 3rd year?
The book value at the end of year 3 is ₹52,000. Yearly straight-line depreciation is ₹16,000 on the depreciable amount of ₹80,000 over five years, so three years remove ₹48,000 from the cost of ₹1,00,000.
- A₹52,000Correct
- B₹40,000
- C₹48,000
- D₹60,000
Explanation
Annual depreciation = (1,00,000 − 20,000)/5 = ₹16,000. After 3 years accumulated depreciation = ₹48,000, so book value = 1,00,000 − 48,000 = ₹52,000. The option ₹48,000 is the accumulated depreciation, not the book value.
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