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A building was constructed 20 years ago at Rs. 50,000. The estimated life of the building is 90 years. What is the present value of the building using the straight-line method? Use 10% scrap value
  • a)
    Rs. 40,000
  • b)
    Rs. 38,888
  • c)
    Rs. 45,000
  • d)
    Rs. 35,000
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
A building was constructed 20 years ago at Rs. 50,000. The estimated ...
Concept
In the Straight line method, it is assumed that the property loses its value by the same amount every year. A fixed amount of the original cost is deducted every year so that at the end of the utility period, only the scrap value is left.
Annual Depreciation is given by:
D = C-S/n
Where,
D = Annual Depreciation
S = Scrap value
n = life of the property in years = 90 years
S = Scrap value = 0.1 × 50000 = ₹ 5000
C = Original cost = ₹ 50000
Calculation:
Book value of the property at the end of 20 years = Original cost - 20 × D.
∴ Book Value = 50000 – 20 × 500 = ₹ 40000/-
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Most Upvoted Answer
A building was constructed 20 years ago at Rs. 50,000. The estimated ...
Calculation using straight-line method:

Annual depreciation = (Cost of building - Scrap value) / Estimated life
Scrap value = 10% of cost of building

Annual depreciation = (50,000 - 5,000) / 90
Annual depreciation = 500

Present value of building = Cost of building - (Annual depreciation x Age of building)
Age of building = 20 years

Present value of building = 50,000 - (500 x 20)
Present value of building = 40,000

Therefore, the present value of the building using the straight-line method with 10% scrap value is Rs. 40,000.
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A building was constructed 20 years ago at Rs. 50,000. The estimated life of the building is 90 years. What is the present value of the building using the straight-line method? Use 10% scrap valuea)Rs. 40,000b)Rs. 38,888c)Rs. 45,000d)Rs. 35,000Correct answer is option 'A'. Can you explain this answer?
Question Description
A building was constructed 20 years ago at Rs. 50,000. The estimated life of the building is 90 years. What is the present value of the building using the straight-line method? Use 10% scrap valuea)Rs. 40,000b)Rs. 38,888c)Rs. 45,000d)Rs. 35,000Correct answer is option 'A'. Can you explain this answer? for Railways 2024 is part of Railways preparation. The Question and answers have been prepared according to the Railways exam syllabus. Information about A building was constructed 20 years ago at Rs. 50,000. The estimated life of the building is 90 years. What is the present value of the building using the straight-line method? Use 10% scrap valuea)Rs. 40,000b)Rs. 38,888c)Rs. 45,000d)Rs. 35,000Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for Railways 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A building was constructed 20 years ago at Rs. 50,000. The estimated life of the building is 90 years. What is the present value of the building using the straight-line method? Use 10% scrap valuea)Rs. 40,000b)Rs. 38,888c)Rs. 45,000d)Rs. 35,000Correct answer is option 'A'. Can you explain this answer?.
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