CA Foundation · Quantitative Aptitude · Mathematics of Finance
A machine costing ₹2,00,000 is depreciated by the straight-line method. Its estimated scrap value after 8 years is ₹40,000. What is the book value of the machine at the end of 5 years?
The book value is ₹1,00,000. Annual straight-line depreciation is (₹2,00,000 - ₹40,000) divided by 8, which is ₹20,000. Over 5 years this totals ₹1,00,000, and subtracting it from the cost of ₹2,00,000 leaves a book value of ₹1,00,000.
- A₹1,00,000Correct
- B₹1,20,000
- C₹80,000
- D₹1,60,000
Explanation
Annual depreciation = (2,00,000 - 40,000)/8 = ₹20,000. After 5 years, accumulated depreciation = ₹1,00,000, so book value = 2,00,000 - 1,00,000 = ₹1,00,000. Option ₹1,20,000 wrongly deducts only 4 years of depreciation; ₹80,000 wrongly ignores scrap and uses 2,00,000/8 incorrectly with 5 years plus scrap deduction.
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