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Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will be
- a)Rs. 6,000
- b)Rs. 12,000
- c)Rs. 18,000
- d)Rs. 36,000
Correct answer is option 'D'. Can you explain this answer?
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Understanding the Sum of Years Digits Method
The Sum of Years Digits (SYD) method is a form of accelerated depreciation where the asset loses value more rapidly in the earlier years of its useful life. Here’s how it works:
Step 1: Calculate the Sum of Years
- For an asset with a useful life of 6 years, the sum of the years is calculated as follows:
- 6 + 5 + 4 + 3 + 2 + 1 = 21
Step 2: Determine the Depreciation Rate
- The depreciation rate for each year is determined by the remaining useful life divided by the sum of the years.
Year 1 Calculation:
- For the first year, the remaining life is 6 years. Thus, the depreciation fraction for the first year is:
- \( \frac{6}{21} \)
Step 3: Calculate the Annual Depreciation
- The annual depreciation expense is then calculated using the original cost of the asset:
- Annual Depreciation = Original Cost × Depreciation Fraction
- Applying the values:
- Annual Depreciation = Rs. 1,26,000 × \( \frac{6}{21} \)
- Annual Depreciation = Rs. 1,26,000 × 0.2857 ≈ Rs. 36,000
Conclusion
The depreciation for the first year under the Sum of Years Digits method is therefore approximately Rs. 36,000. Hence, the correct answer is option 'D'. This method ensures a higher depreciation charge in the earlier years, reflecting the asset’s usage and wear over time.
The Sum of Years Digits (SYD) method is a form of accelerated depreciation where the asset loses value more rapidly in the earlier years of its useful life. Here’s how it works:
Step 1: Calculate the Sum of Years
- For an asset with a useful life of 6 years, the sum of the years is calculated as follows:
- 6 + 5 + 4 + 3 + 2 + 1 = 21
Step 2: Determine the Depreciation Rate
- The depreciation rate for each year is determined by the remaining useful life divided by the sum of the years.
Year 1 Calculation:
- For the first year, the remaining life is 6 years. Thus, the depreciation fraction for the first year is:
- \( \frac{6}{21} \)
Step 3: Calculate the Annual Depreciation
- The annual depreciation expense is then calculated using the original cost of the asset:
- Annual Depreciation = Original Cost × Depreciation Fraction
- Applying the values:
- Annual Depreciation = Rs. 1,26,000 × \( \frac{6}{21} \)
- Annual Depreciation = Rs. 1,26,000 × 0.2857 ≈ Rs. 36,000
Conclusion
The depreciation for the first year under the Sum of Years Digits method is therefore approximately Rs. 36,000. Hence, the correct answer is option 'D'. This method ensures a higher depreciation charge in the earlier years, reflecting the asset’s usage and wear over time.
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Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 yea...
D
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Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer?
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Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer? 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 Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer?.
Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer? 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 Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer?.
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Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer?, a detailed solution for Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will bea)Rs. 6,000b)Rs. 12,000c)Rs. 18,000d)Rs. 36,000Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
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