Subtopic: Sources of power on the farm – human, animal, mechanical, electrical, wind, solar and biomass
Question Statement:
The initial cost of a tractor is Rs. 4,00,000. The annual rate of depreciation is 15%. Following declining balance method, the value of the tractor at the end of 6th year is
Options:
(A) Rs. 40,000
(B) Rs. 1,51,000
(C) Rs. 1,76,000
(D) Rs. 2,01,000
Official Answer Key:
B
Step-by-Step Solution & Explanation
Declining-balance (written-down-value) method: Vn = P(1−d)ⁿ. V6 = 4,00,000 × (0.85)^6 = 4,00,000 × 0.37715 = Rs. 1,50,860 ≈ Rs. 1,51,000. This matches option (B). Using straight-line depreciation instead would give a different (linear) result, which is the logic behind distractor (C).
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