Multiple choice

Directions: Choose the correct option for the given question.

A machinery is depreciating under Sum of the Year Digit Method. Depreciation of 3rd year was Rs.2,000/-. What was the original cost of machinery assuming that the estimated life of machinery was 4 years?

  1. Rs. 15,000

  2. Rs. 1,50,000

  3. Rs. 10

  4. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under the Sum of the Years Digits method, for a 4-year life, the sum of digits is 4 + 3 + 2 + 1 = 10. The depreciation fractions for years 1, 2, 3, and 4 are 4/10, 3/10, 2/10, and 1/10 respectively. The 3rd year depreciation is given as Rs. 2000, which equals (2/10) multiplied by the original cost, yielding an original cost of Rs. 10,000, making None of these the correct option.

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