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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?

A. Rs. 1000

B. Rs. 2000

C. Rs. 3000

D. Rs. 5000

Answer: Option A

Solution(By Examveda Team)

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.

This Question Belongs to Commerce >> Accounting

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