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A machine is depreciated @20% on reducing balance. The original cost of the machine was 1L and its ultimate scrap value was ₹30K. The effective life of the machine is???? a) 4.5 yr(approx) b) 5.4 yr(approx) c) 5 yr(approx) d) none?
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A machine is depreciated @20% on reducing balance. The original cost o...
Calculation of Effective Life of the Machine

Given Data:
- Original cost of the machine: ₹1,00,000
- Ultimate scrap value: ₹30,000
- Depreciation rate: 20%

Formula for Depreciation on Reducing Balance Method:
Depreciation for the year = (Opening Book Value - Scrap Value) * Depreciation Rate

Calculation:
- Depreciation for the first year = (1,00,000 - 30,000) * 20% = ₹14,000
- Book value at the end of the first year = 1,00,000 - 14,000 = ₹86,000

Iterating the above steps for subsequent years:
- Depreciation for the second year = (86,000 - 30,000) * 20% = ₹11,200
- Book value at the end of the second year = 86,000 - 11,200 = ₹74,800

Continue the calculation until the book value reaches the scrap value.

Effective Life:
- By iterating the above steps, we find that the book value reaches the scrap value after 5 years.
- Therefore, the effective life of the machine is approximately 5 years.
Therefore, the correct answer is:
c) 5 years (approx)
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A machine is depreciated @20% on reducing balance. The original cost of the machine was 1L and its ultimate scrap value was ₹30K. The effective life of the machine is???? a) 4.5 yr(approx) b) 5.4 yr(approx) c) 5 yr(approx) d) none?
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A machine is depreciated @20% on reducing balance. The original cost of the machine was 1L and its ultimate scrap value was ₹30K. The effective life of the machine is???? a) 4.5 yr(approx) b) 5.4 yr(approx) c) 5 yr(approx) d) none? 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 A machine is depreciated @20% on reducing balance. The original cost of the machine was 1L and its ultimate scrap value was ₹30K. The effective life of the machine is???? a) 4.5 yr(approx) b) 5.4 yr(approx) c) 5 yr(approx) d) none? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A machine is depreciated @20% on reducing balance. The original cost of the machine was 1L and its ultimate scrap value was ₹30K. The effective life of the machine is???? a) 4.5 yr(approx) b) 5.4 yr(approx) c) 5 yr(approx) d) none?.
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