A machine was purchased for Rs 4000and it was estimated that it will work for three years and at the end of its life its residual value will be Rs . 32. find out the rate of depreciation if depreciation, is calculated at diminishing balance method
Answer (1)
10th Mar, 2020
Hello there!!!
Under diminishing value method, depreciation is charged at a fixed percentage on the written down value of the asset every year.
The formula is given by: dep rate = 1 - (salvage value/cost)^(1/time),
here, salvage value = 32
cost value = 4000
time = 3 years
Therefore, rate of dep = 1 - (32/4000)^(1/3) = 0.8 or 80%
Hope this helps.
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