Company bought a machine for Rs.90,000 on credit. Another Rs.10,000 is spent on its installation. If the estimated useful life is 5 years and scrap value at the end is Rs. 5000, what will be

To calculate the rate of depreciation, we need to first determine the depreciable cost of the machine. Depreciable cost is the original cost of the machine minus the scrap value.

Given:
Cost of machine = Rs 90,000
Installation cost = Rs 10,000
Scrap value = Rs 5,000
Estimated useful life = 5 years

1. Determining the depreciable cost:
Depreciable cost = Cost of machine + Installation cost - Scrap value
Depreciable cost = Rs 90,000 + Rs 10,000 - Rs 5,000 = Rs 95,000

2. Calculating annual depreciation:
Annual depreciation = Depreciable cost / Useful life
Annual depreciation = Rs 95,000 / 5 = Rs 19,000

3. Calculating the rate of depreciation:
Rate of depreciation = (Annual depreciation / Cost of machine) * 100
Rate of depreciation = (Rs 19,000 / Rs 90,000) * 100 = 21.11%

The correct option is not included in the given choices. However, the closest option to the calculated rate of depreciation is 20% (option D).

Therefore, the correct answer would be D) 20%.

Explanation:
Depreciation is the process of allocating the cost of an asset over its useful life. In this case, the company bought a machine for Rs 90,000 on credit and spent an additional Rs 10,000 on its installation. The estimated useful life of the machine is 5 years, and the scrap value at the end of its life is Rs 5,000.

To calculate the rate of depreciation, we first determine the depreciable cost, which is the original cost of the machine plus any additional costs (installation) minus the scrap value. In this case, the depreciable cost is Rs 90,000 + Rs 10,000 - Rs 5,000 = Rs 95,000.

Next, we divide the depreciable cost by the useful life of the machine to calculate the annual depreciation. In this case, the annual depreciation is Rs 95,000 / 5 = Rs 19,000.

Finally, to calculate the rate of depreciation, we divide the annual depreciation by the cost of the machine and multiply by 100. In this case, the rate of depreciation is (Rs 19,000 / Rs 90,000) * 100 = 21.11%.

The correct answer is D) 20%, which is the closest option to the calculated rate of depreciation.