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Consider the following information:
I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs. 1,00,000.
III. Residual value of the asset at the end of useful life = Rs. 40,960.
The estimated useful life of the asset, in years, is
I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs. 1,00,000.
III. Residual value of the asset at the end of useful life = Rs. 40,960.
The estimated useful life of the asset, in years, is
- a)4 years
- b)5 years
- c)6 years
- d)7 years
Correct answer is option 'A'. Can you explain this answer?
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Consider the following information:I. Rate of depreciation under the w...
To calculate the estimated useful life of the asset, we need to use the written down method of depreciation.
The written down method is a common method used to calculate depreciation, where the asset's value is reduced by a fixed percentage each year.
Given information:
Rate of depreciation under the written down method = 20%
Original cost of the asset = Rs. 1,00,000
Residual value of the asset at the end of useful life = Rs. 40,960
Let's calculate the depreciation expense for each year using the written down method formula:
Depreciation expense = (Original cost - Residual value) x Rate of depreciation
Year 1:
Depreciation expense = (Rs. 1,00,000 - Rs. 40,960) x 20% = Rs. 11,008
Year 2:
Depreciation expense = (Rs. 88,992 - Rs. 40,960) x 20% = Rs. 9,206.40
Year 3:
Depreciation expense = (Rs. 79,785.60 - Rs. 40,960) x 20% = Rs. 7,165.12
Year 4:
Depreciation expense = (Rs. 72,620.48 - Rs. 40,960) x 20% = Rs. 6,132.10
Year 5:
Depreciation expense = (Rs. 66,488.38 - Rs. 40,960) x 20% = Rs. 5,105.68
As we can see, the depreciation expense decreases each year. To find the estimated useful life of the asset, we need to determine the year in which the depreciation expense becomes less than or equal to the residual value (Rs. 40,960).
In this case, the depreciation expense becomes less than or equal to the residual value in Year 4. Therefore, the estimated useful life of the asset is 4 years.
Hence, the correct answer is option 'A' - 4 years.
The written down method is a common method used to calculate depreciation, where the asset's value is reduced by a fixed percentage each year.
Given information:
Rate of depreciation under the written down method = 20%
Original cost of the asset = Rs. 1,00,000
Residual value of the asset at the end of useful life = Rs. 40,960
Let's calculate the depreciation expense for each year using the written down method formula:
Depreciation expense = (Original cost - Residual value) x Rate of depreciation
Year 1:
Depreciation expense = (Rs. 1,00,000 - Rs. 40,960) x 20% = Rs. 11,008
Year 2:
Depreciation expense = (Rs. 88,992 - Rs. 40,960) x 20% = Rs. 9,206.40
Year 3:
Depreciation expense = (Rs. 79,785.60 - Rs. 40,960) x 20% = Rs. 7,165.12
Year 4:
Depreciation expense = (Rs. 72,620.48 - Rs. 40,960) x 20% = Rs. 6,132.10
Year 5:
Depreciation expense = (Rs. 66,488.38 - Rs. 40,960) x 20% = Rs. 5,105.68
As we can see, the depreciation expense decreases each year. To find the estimated useful life of the asset, we need to determine the year in which the depreciation expense becomes less than or equal to the residual value (Rs. 40,960).
In this case, the depreciation expense becomes less than or equal to the residual value in Year 4. Therefore, the estimated useful life of the asset is 4 years.
Hence, the correct answer is option 'A' - 4 years.
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Consider the following information:I. Rate of depreciation under the written down method = 20%.II. Original cost of the asset = Rs. 1,00,000.III. Residual value of the asset at the end of useful life = Rs. 40,960.The estimated useful life of the asset, in years, isa)4 yearsb)5 yearsc)6 yearsd)7 yearsCorrect answer is option 'A'. Can you explain this answer?
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Consider the following information:I. Rate of depreciation under the written down method = 20%.II. Original cost of the asset = Rs. 1,00,000.III. Residual value of the asset at the end of useful life = Rs. 40,960.The estimated useful life of the asset, in years, isa)4 yearsb)5 yearsc)6 yearsd)7 yearsCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Consider the following information:I. Rate of depreciation under the written down method = 20%.II. Original cost of the asset = Rs. 1,00,000.III. Residual value of the asset at the end of useful life = Rs. 40,960.The estimated useful life of the asset, in years, isa)4 yearsb)5 yearsc)6 yearsd)7 yearsCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following information:I. Rate of depreciation under the written down method = 20%.II. Original cost of the asset = Rs. 1,00,000.III. Residual value of the asset at the end of useful life = Rs. 40,960.The estimated useful life of the asset, in years, isa)4 yearsb)5 yearsc)6 yearsd)7 yearsCorrect answer is option 'A'. Can you explain this answer?.
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