Question
Download Solution PDFCalculate the annual depreciation of a property, whose original cost is Rs. 30,00,000. Consider its scrape value as Rs. 3,00,000 after 30 years. Use the straight-line method.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFConcepts:
The straight-line method of depreciation assumes a constant rate of depreciation. It calculates how much a specific asset depreciates in one year, and then depreciates the asset by that amount every year after that.
To calculate the straight-line depreciation rate for your asset, simply subtract the salvage value from the asset cost to get total depreciation, and then divide that by useful life to get annual depreciation:
Annual depreciation = (purchase price - salvage value) / useful life
Calculation:
Cost of Construction of building i.e. Purchase Value = Rs. 30,00, 000/-
Salvage Value = Rs. 3,00, 000/-
Design life of building = 30 Years
Annual Depreciation = (30,00, 000-3,00,000)/30
⇒ Annual Depreciation = Rs. 90000 /year
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