PRC-1 · Chapter 6 · Question 67 of 100
A machine is bought for Rs. 100,000 on 1 January 2021 with an estimated useful life of 5 years and a residual value of Rs. 10,000. Using the sum-of-the-years'-digits method, what is the exact depreciation charge for the FIRST year (2021)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 30,000
Explanation
Sum of digits = 5+4+3+2+1 = 15. Depreciable amount = 100,000 - 10,000 = 90,000. First year fraction = 5/15. Depreciation = 90,000 x (5/15) = Rs. 30,000.
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