Multiple choice

Purchase price of machine 75, 000, installation charges Rs. 25, 000, residual value Rs. 40, 960. The annual depreciation under WDV is Rs. 20, 000. The useful life of machine is

  1. 6 years

  2. 5 years

  3. 4 years

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Using WDV method: Cost = 75,000 + 25,000 = 100,000. Annual depreciation = 20,000 (given). Residual value after n years = 100,000 × (1 - 0.20)^n = 40,960. Solving: 0.8^n = 0.4096, so n = 4 years. Verifying: Year 1: 80,000; Year 2: 64,000; Year 3: 51,200; Year 4: 40,960 ✓

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