PRC-1 · Chapter 6 · Question 24 of 100
A company acquires a machine for Rs. 400,000 with an estimated residual value of Rs. 40,000 and a useful life of 5 years. Using the sum-of-the-years'-digits (SYD) method, what is the depreciation charge for Year 1?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 120,000
Explanation
Sum of digits (5 years) = 5 + 4 + 3 + 2 + 1 = 15. Depreciable amount = 400,000 - 40,000 = 360,000. Year 1 Depreciation = 360,000 x (5/15) = Rs. 120,000.
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