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A machinery depreciated by Rs.2000 every year. Which method is being used to calculate depreciation ?
- a)Written Down value method
- b)Straight line method
- c)Sum of these
- d)None of these
Correct answer is option 'B'. Can you explain this answer?
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A machinery depreciated by Rs.2000 every year. Which method is being u...
Explanation:
The method being used to calculate depreciation in this case is the Straight line method.
Straight line method:
The straight line method is a common method used for calculating depreciation. Under this method, the depreciation expense is evenly distributed over the useful life of the asset. This means that the same amount of depreciation expense is recognized each year.
In this case, the machinery is depreciating by Rs.2000 every year. This means that the depreciation expense is constant and the same amount is deducted from the value of the machinery each year.
Advantages of the straight line method:
1. Simplicity: The straight line method is easy to understand and calculate.
2. Equal distribution: The method ensures that the depreciation expense is evenly distributed over the useful life of the asset.
3. Predictability: The amount of depreciation expense is known in advance, making it easier to budget and plan for future expenses.
Other methods of depreciation:
There are several other methods of calculating depreciation, including:
- Written Down Value method (Option A): Under this method, the depreciation expense is calculated based on the remaining book value of the asset each year. The depreciation expense decreases over time.
- Sum of these (Option C): This option is not a recognized method of calculating depreciation. It is likely a combination of the straight line and written down value methods.
- None of these (Option D): This option is incorrect as the machinery is clearly depreciating by a fixed amount each year.
Therefore, the correct answer is option B, the Straight line method, as the machinery is depreciating by a constant amount of Rs.2000 every year.
The method being used to calculate depreciation in this case is the Straight line method.
Straight line method:
The straight line method is a common method used for calculating depreciation. Under this method, the depreciation expense is evenly distributed over the useful life of the asset. This means that the same amount of depreciation expense is recognized each year.
In this case, the machinery is depreciating by Rs.2000 every year. This means that the depreciation expense is constant and the same amount is deducted from the value of the machinery each year.
Advantages of the straight line method:
1. Simplicity: The straight line method is easy to understand and calculate.
2. Equal distribution: The method ensures that the depreciation expense is evenly distributed over the useful life of the asset.
3. Predictability: The amount of depreciation expense is known in advance, making it easier to budget and plan for future expenses.
Other methods of depreciation:
There are several other methods of calculating depreciation, including:
- Written Down Value method (Option A): Under this method, the depreciation expense is calculated based on the remaining book value of the asset each year. The depreciation expense decreases over time.
- Sum of these (Option C): This option is not a recognized method of calculating depreciation. It is likely a combination of the straight line and written down value methods.
- None of these (Option D): This option is incorrect as the machinery is clearly depreciating by a fixed amount each year.
Therefore, the correct answer is option B, the Straight line method, as the machinery is depreciating by a constant amount of Rs.2000 every year.
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A machinery depreciated by Rs.2000 every year. Which method is being used to calculate depreciation ?a) Written Down value method b) Straight line method c) Sum of these d) None of these Correct answer is option 'B'. Can you explain this answer?
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