1.2. Book Value Calculation for Second Year

Try these first

1. 1.

   What is the depreciation for the first year for a machine costing 28 lakh at a 40% rate?

   Hint

   Use the formula D = rating × book value.

2. 2.

   What is the book value at the end of the first year after applying the first year depreciation?

   Hint

   Subtract the first year's depreciation from the initial cost.

3. 3.

   What is the depreciation for the first year if the purchase price is 28 lakh?

   • 8,00,000 rupees
   • 11,20,000 rupees
   • 12,00,000 rupees

   Hint

   Remember to multiply the purchase price by the rate of depreciation.

4. 4.

   Is it true that the book value decreases every year?

   • True
   • False

   Hint

   Think about how depreciation affects the value of an asset.

5. 5.

   If a machine constantly depreciates at a rate of 40% annually, make a projection of its value over 5 years, beginning with an initial value of 28 lakh.

   Hint

   Calculate each year's depreciation based on the prior year's book value.

6. 6.

   Discuss two strategies for when to replace a machine, focusing on cost-benefit analysis.

   Hint

   Think about costs versus productivity and when a machine becomes less financially viable.