[amp_mcq option1=”Rs. 8,43,750″ option2=”Rs. 8,75,000″ option3=”Rs. 10,50,000″ option4=”Rs. 11,56,250″ correct=”option1″]
The correct answer is A. Rs. 8,43,750.
The general double declining balance method is a depreciation method that allows for a higher depreciation expense in the early years of an asset’s life and a lower depreciation expense in the later years. The depreciation rate is calculated by multiplying the straight-line depreciation rate by 2.
In this case, the straight-line depreciation rate is 1/8 = 0.125. The depreciation rate using the general double declining balance method is 0.125 * 2 = 0.25.
The book value of the excavator at the end of 3 years is calculated as follows:
Book value = Cost – Depreciation
Book value = 20,00,000 – (3 * 0.25 * 20,00,000) = 8,43,750
Option B is incorrect because it is the depreciation expense for the first year. Option C is incorrect because it is the book value of the excavator at the end of 4 years. Option D is incorrect because it is the book value of the excavator at the end of 5 years.