Question

A flower vase costs 36,000. With an annual depreciation of 2,000, its cost will be 6,000 in how many years?

• A. 10
• B. 15
• C. 17
• D. 6

Hint:

Linear depreciation is ideal for assets with predictable, consistent loss in value. The formula for linear depreciation helps you calculate the lifespan of such assets, making it easier to plan for replacement or sale.

Answer 1

The Correct Option is B

This problem involves linear depreciation. The vase’s value decreases by Rs.2,000 each year. 

The formula for the number of years needed to reach a specific value is:

Number of Years = $\frac{\text{Initial Value - Final Value}}{\text{Annual Depreciation}}$.

Given:

Initial Value = Rs. 36,000,
Final Value = Rs. 6,000,
Annual Depreciation = Rs. 2,000.

Substitute into the formula:

Number of Years = $\frac{\text{Rs. 36,000 - Rs. 6,000}}{\text{Rs. 2,000}} = \frac{\text{Rs. 30,000}}{\text{Rs. 2,000}} = 15$ years.

Thus, it will take 15 years for the value of the vase to reduce to Rs.6,000.

Answer 2

This problem involves linear depreciation, a common concept in accounting and finance. Linear depreciation means that the value of an asset decreases by a fixed amount every year, rather than by a percentage of its current value. In this case, the vase’s value decreases by Rs. 2,000 each year.

Linear depreciation is often used for assets that lose their value at a steady rate over time, such as vehicles, machinery, or in this case, a vase. The formula used to calculate the number of years needed to reduce an asset's value to a specific amount is straightforward and helps determine the lifespan of the asset based on its initial cost, the rate of depreciation, and the target value.

The formula for the number of years needed to reach a specific value is:

Number of Years = $\frac{\text{Initial Value - Final Value}}{\text{Annual Depreciation}}$

In this scenario, we are given the following data:

• Initial Value = Rs. 36,000 (the starting value of the vase),
• Final Value = Rs. 6,000 (the target value after depreciation),
• Annual Depreciation = Rs. 2,000 (the amount by which the vase’s value decreases each year).

The goal is to calculate how many years it will take for the vase's value to decrease from Rs. 36,000 to Rs. 6,000, assuming a constant depreciation rate of Rs. 2,000 per year.

Substitute the given values into the formula:

Number of Years = $\frac{\text{Rs. 36,000 - Rs. 6,000}}{\text{Rs. 2,000}} = \frac{\text{Rs. 30,000}}{\text{Rs. 2,000}} = 15$ years.

Thus, it will take 15 years for the value of the vase to reduce to Rs. 6,000. This means that after 15 years of linear depreciation at Rs. 2,000 per year, the vase's value will reach the target value of Rs. 6,000.