Question

A firm purchased a plant for Rs. 40,000. Erection charges amounted to Rs. 2,000. Effective life of the plant is 5 years. Calculate the amount of depreciation per year under straight line method?

Answer 1

Amount of depreciation = (Total Cost - Scrap Value) / (Estimated life)

= Cost of plant + erection charge

= Rs. 40,000 + 2,000

= Rs. 42,000

= \(\frac{42,000-0}{5\,years}\)

= Rs. 8,400