A machine with a carrying amount of Rs. 100,000 is depreciated using the reducing-balance method at 20% per year. What is its depreciation for the second year?
Correct answer: A. Rs. 16,000
- A. Rs. 16,000
- B. Rs. 20,000
- C. Rs. 24,000
- D. Rs. 80,000
Explanation
The first-year depreciation is Rs. 20,000, leaving a carrying amount of Rs. 80,000. Second-year depreciation is 20% of Rs. 80,000, which equals Rs. 16,000.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
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