Question Bank • QB_FM_005 NAT • 2 Marks

Section 2: Farm Machinery

Farm Machinery

Subtopic: Cost analysis of implements and tractors

Question Statement:

A seed drill was purchased for $\text{Rs. } 1,20,000$. Its salvage value after an estimated useful life of 8 years is $10\%$ of the purchase price. Using the straight-line depreciation method, the annual depreciation in Rupees is ________ (answer in integer).

Answer Key:

13500

Step-by-Step Solution & Explanation

Under the straight line depreciation method: $D = \frac{C - S}{L}$ Where: $C = \text{Rs. } 1,20,000$ (purchase price) $S = 0.10 \times 1,20,000 = \text{Rs. } 12,000$ (salvage value) $L = 8\text{ years}$ (useful life) $D = \frac{1,20,000 - 12,000}{8} = \frac{1,08,000}{8} = 13,500\text{ Rupees/year}$
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