PRC-1 · Chapter 6 · Question 42 of 100
An entity uses the straight-line method. The cost of an asset is Rs. 100,000, residual value is Rs. 10,000, and useful life is 10 years. At the start of year 4, management revises the remaining useful life to 4 years (7 years total life) and residual value to Rs. 6,000. What is the depreciation charge for Year 4?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 16,750
Explanation
Original Depr = 90k/10 = 9k/year. WDV at start of Y4 (after 3 yrs) = 100k - (9k*3) = 73,000. New Depreciable Amount = 73,000 - 6,000 (new RV) = 67,000. New remaining life = 4 years. New Depr = 67,000 / 4 = Rs. 16,750.
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