PRC-1 · Chapter 6 · Question 31 of 100
A generator was purchased on 1 March 2022 for Rs. 135,000. The estimated useful life is 5 years. The accountant calculated the correct straight-line depreciation of Rs. 20,000 for the financial year ended 31 December 2022. What residual value was estimated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 15,000
Explanation
The asset was held for 10 months (March to December). Depreciation = (Cost - RV) / 5 * (10/12). 20,000 = (135,000 - RV) / 6. 120,000 = 135,000 - RV. Therefore, RV = 15,000.
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