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Cost of equipment used in power system is Rs. 1,00,000 and its scrap value is Rs. 10,000 after a useful life of 20 years. What is the annual depreciation charge of the equipment?

Cost of equipment used in power system is Rs. 1,00,000 and its scrap value is Rs. 10,000 after a useful life of 20 years. What is the annual depreciation charge of the equipment? Correct Answer Rs. 4,500

Concept:

According to straight line method,

Annual depreciation charge = (Initial value – Salvage value) / (Useful life)

Calculation:

Initial value = Rs 1,00,000

Final value / scrap value = Rs 10,000

Useful life = 20 years

Annual depreciation charge = (100000 – 10000) / (20)

Annual depreciation charge = (90000) / (20)

Annual depreciation charge = Rs. 4,500

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