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A company purchased a vehicle for Rs 6000 It will be...

This question belongs to Commerce Accounting
Accounting
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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?

Answer & Solution
Correct Answer: Option A
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.
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