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Scrap value after useful life, calculation.

A machine the life of which is estimated to be 15 year costs Rs.40000. Calculate the scrap value at the end of its useful life, deprecation being charged at 10% per annum on the w.d.v method.

asked Jun 20, 2015 in Depreciation, Provisions and Reserves. by vishali sharma (12 points) 1,458 views

1 Answer

0 votes
One simple method of finding out scrap value after 15 years is as shown below:

Cost of Machine = Rs.40000 and rate of depreciation is 10% on written down value method

Life of Machine = 15 years

Scrap of value after 15 years = Rs.40000 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 x .9 = Rs.8235.64

Note: After charging depreciation at the rate of 10%, written down value of machine is 90% i.e. .9.

Second method is by using the formula: R = [1 - Nāˆš(scrap value/cost)] X 100    (N is life of machine in number of years and also it is Nth root)

10 = [1 - 15āˆš(S/40000)] X 100      

10/100 = [1 - 15āˆš(S/40000)]

1 - .1 = (15āˆšS/40000)

(.9)^15 = S/40000

S = Rs.8235.64

answered Jun 20, 2015 by jbsclasses (3,969 points)
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