Bissoy.com
Doctors Medicines MCQs Q&A

Determine the present value of a building that was constructed 30 years ago at Rs. 50,000. The estimated life of the building is 50 years, at the end of which it will have 10% scrap value of its cost of construction. Depreciation is to be calculated by straight line method.

Determine the present value of a building that was constructed 30 years ago at Rs. 50,000. The estimated life of the building is 50 years, at the end of which it will have 10% scrap value of its cost of construction. Depreciation is to be calculated by straight line method. Correct Answer Rs. 23,000

Concepts:

The straight-line method of depreciation assumes a constant rate of depreciation. It calculates how much a specific asset depreciates in one year, and then depreciates the asset by that amount every year after that.

To calculate the straight-line depreciation rate for your asset, simply subtract the salvage value from the asset cost to get total depreciation, and then divide that by useful life to get annual depreciation:

Annual depreciation = (purchase price - salvage value) / useful life

Calculation:

Cost of Construction of building i.e. Purchase Value = Rs. 50, 000/-

Salvage Value = 10 % of Purchase Value = Rs. 5,000/-

Design life of building = 50 Years

Annual Depreciation = (50,000-5,000)/50

⇒ Annual Depreciation = Rs. 900 /year

According to straight-line depreciation method, the building will depreciate Rs. 900  every year.

Total Depreciation at the end of 30 years = Rs. 900 × 30 = Rs. 27,000/-

Present Value at the end of 30 years = {Purchase Value} – {Total Depreciation at the end of 30 years}

= Rs. 50,000 – Rs. 27000

= Rs. 23,000/- Ans.

Related Questions

A company owns some land and buildings for which the following details are relevant : Cost of land Taka 50,000; cost of building Taka 100,000, estimated life of building 20 years, estimated residual value of building Taka 2000; estimated residual value of land Taka 50,000. The company uses the straight line depreciation method. Which is the correct annual depreciation charge for this asset?
Given below are quantities named A,B and C. Based on the given information, you have to determine the relation between the quantities. You should use the given data and your knowledge of mathematics to choose among the possible answer. Akash’s present age is six years less than Badshah’s age after nine years. The ratio of present age of Badshahand RAFTAAR is 5:9. Raftaar is 21 years younger than Denny and Denny is three years older than Honey. Square of the Honey’s present age is 1350 more than 15 times of Honey’s present age? Quantity A: What is the difference between AKASH’s present age and HONEY’s age after 16 years? Quantity B: After 6 years Mankirat’s age is twice that of Akash’s present age. Diljeet’s present age is 3.5 times of 25% of sum of present age of Mankirat and A. What is the present age of Diljeet? Quantity C: Twice of A’s present age is eight years more than that of Babbu’spresent age, then find the Babbu’s present age?
A machine having assumed life of 20 years is purchased for Rs 32000/-. Its scrap value at the end of its life is Rs 8000/-. If the depreciation is calculated by diminishing balance method, then percentage reduction in its value at the end of first year is __________ percent.
A machine was purchased for Rs. 10,000 and its life was estimated to be 3 years, and at the end of its life, its book value was Rs. 5,120. If depreciation is calculated according to Diminishing Balance method, the rate of depreciation would be:
A machine was purchased for Rs. 1,000 and its life was estimated to be 3 years and at the end of life its book value will be Rs. 512. If depreciation is calculated according to written down value method. The rate of depreciation would be:
Six buildings L. M, N, X, Y and Z are in a circle facing the centre. Each building is exactly opposite another one. Building X is not immediately next to either Building M or Building Z. Building M is to Building Y's immediate right/ Building N is exactly opposite Building M. Building L, which is opposite Building X, has Building Z to its immediate right. Which of the following buildings is located to Building Z's immediate right?
Cost of Asset = Rs. 21,000
Scrap value = Rs. 1,000
Depreciation rate = 10% p.a.
What will be the depreciation for the second year if depreciation is charged by straight line method?
The original cost of an equipment is Rs.10,000. Its salvage value at the end of its total useful life of five years is Rs. 1,000. Its book value at the end of two years of its useful life (as per straight line method of evaluation of depreciation) will be
The institute of Electronics and Communications Engineers of the Philippines (IECEP) is planning to put up its own building. Two proposals being considered are:
A. The construction of the building now to cost P 400,000
B. The construction of a smaller building now to cost P300,000 and at the end of 5 years, an extension to be added to cost P 200,000.
By how much is proposal B more economical than proposal A if interest rate is 20% and depreciation to be neglected?
Six buildings ‘L’, ‘M’, ‘N’, ‘Y’ and ‘Z’ stand in a circle facing the centre. Each building is exactly opposite another one. Building ‘X’ is NOT immediately next to either building ‘M’ or ‘Z’. Building ‘M’ is to building Y’s immediate right. Building ‘N’ is exactly opposite building ‘M’. Building ‘L’, which is opposite building ‘X’, has building ‘Z’ to its immediate right. Which of the following buildings is located between building ‘L’ and ‘Y’?