The useful life of a machine is estimated to be 10 years and cost Rs.10,000. Rate of depreciation is 10% p.a. The scrap value at the end of its life is

  • a)
    Rs. 3483

  • b)
    Rs. 4383

  • c)
    Rs. 3400

  • d)
    none of these

Correct answer is option 'A'. Can you explain this answer?

CA Foundation Question

Dinesh Kukreja
Aug 31, 2018
Using declining balance depreciation:

Declining Balance Depreciation Rate = 1 – (Salvage Value / Cost)^(1/Years) 

Rearranging:
Salvage value = Cost x (1 - Depreciation rate)^Years 
Salvage value = 10000 x (1 - 10%)^10 = 3,486.78 

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