Question

The initial cost of a machine is INR 10,00,000 and its salvage value after 10 years of use is INR 50,000. Using the straight line depreciation method, the book value in INR of the machine at the end of 7th year is _________.

Hint:

To calculate book value using straight-line depreciation, subtract the accumulated depreciation from the initial cost.

Answer 1

Correct Answer: 335000

The formula for straight-line depreciation is: \[ \text{Depreciation per year} = \frac{\text{Initial cost} - \text{Salvage value}}{\text{Useful life}} \] Substitute the values: \[ \text{Depreciation per year} = \frac{10,00,000 - 50,000}{10} = \frac{9,50,000}{10} = 95,000 \] The value of the machine at the end of 7 years is: \[ \text{Book value at end of 7 years} = \text{Initial cost} - 7 \times \text{Depreciation per year} \] \[ \text{Book value at end of 7 years} = 10,00,000 - 7 \times 95,000 = 10,00,000 - 6,65,000 = 3,35,000 \] Thus, the book value of the machine at the end of the 7th year is \( \boxed{3,35,000} \).