A company purchased a vehicle for Rs 6000 It will be used for 5 years and its residual value is expe...........

Quantitative Aptitude (Pb Patwari) Accountancy

A company purchased a vehicle for Rs.6000. It will be used for 5 years and its residual value is expected to be Rs. 1000. What is the annual amount of depreciation using straight line method of depreciation?

RS. 1000

RS. 2000

RS. 3000

RS. 5000

Explanation:

Cost of the asset = Rs. 6,000 Salvage Value = Rs. 1,000 Total Depreciation Cost = Cost of asset – Salvage Value = 6000 – 1000 = Rs. 5000 Useful life of the asset = 5 years Thus, annual depreciation cost = (Cost of asset – Salvage Cost)/Useful Life = 5000/5 = Rs. 1000.