Question Bank • QB_FM_072 NAT • 2 Marks

Section 2: Farm Machinery

Farm Machinery

Subtopic: Cost analysis of implements and tractors

Question Statement:

A tractor was purchased for Rs. $7,50,000$. Its salvage value after an economic life of 10 years is estimated to be $10\%$ of purchase price. Calculate the annual straight-line depreciation of the tractor in Rupees.

Answer Key:

67500

Step-by-Step Solution & Explanation

Straight Line Method depreciation is given by: $D = \frac{C - S}{L}$ Where: - Initial Cost $C = 7,50,000$ - Salvage value $S = 0.10 \times 7,50,000 = 75,000$ - Useful life $L = 10\text{ years}$ $D = \frac{750000 - 75000}{10} = \frac{675000}{10} = 67,500\text{ Rs/year}$
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