Question:medium

The cost of a machinery is ₹8,00,000. Its scrap value will be one-tenth of its original cost in 15 years. Using the linear method of depreciation, the book value of the machine at the end of the 10th year will be:

Updated On: Mar 27, 2026
  • ₹4,80,000
  • ₹3,20,000
  • ₹3,68,000
  • ₹4,32,000
Show Solution

The Correct Option is B

Solution and Explanation

Straight-line depreciation reduces an asset's value evenly over its useful life. To calculate the machinery's book value after 10 years, follow these calculations:

Initial Cost: ₹8,00,000.

Scrap Value (1/10th of original cost):
Scrap Value = \( \frac{8,00,000}{10} = 80,000 \).

Depreciable Amount (Original Cost - Scrap Value):
Depreciable Amount = ₹8,00,000 - ₹80,000 = ₹7,20,000.

Annual Depreciation Calculation:
Annual Depreciation = \( \frac{\text{Depreciable Amount}}{\text{Useful Life}} \)

Annual Depreciation = \( \frac{7,20,000}{15} = 48,000 \).

Total Depreciation over 10 Years:
Total Depreciation (10 years) = 48,000 × 10 = ₹4,80,000.

Book Value at Year 10:
Book Value = Original Cost - Total Depreciation.
Book Value = ₹8,00,000 - ₹4,80,000 = ₹3,20,000.

The machinery's book value at the end of the 10th year is ₹3,20,000.

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