A machine is purchased for Rs. 10,000,00 and has an estimated life of 10 years. The salvage value at the end of 10 years is Rs. 1,50,000. The book value of the machine at the end of 5 years using general straight line method of evaluation of depreciation is A. Rs. 4,75,000 B. Rs. 5,75,000 C. Rs. 6,50,000 D. Rs. 8,50,000

Rs. 4,75,000
Rs. 5,75,000
Rs. 6,50,000
Rs. 8,50,000

The correct answer is A. Rs. 4,75,000.

The straight-line method of depreciation is a method of calculating depreciation that allocates an equal amount of the cost of an asset to each accounting period over its estimated useful life. The formula for calculating depreciation using the straight-line method is:

Depreciation = (Cost of asset – Salvage value) / Useful life

In this case, the cost of the asset is Rs. 10,000,00, the salvage value is Rs. 1,50,000, and the useful life is 10 years. Therefore, the depreciation for each year is:

Depreciation = (10,000,000 – 1,50,000) / 10 = 850,000

The book value of the asset at the end of 5 years is therefore:

Book value = Cost of asset – Depreciation

= 10,000,000 – (5 x 850,000)

= 4,750,000

Option B is incorrect because it is the depreciation for the first year. Option C is incorrect because it is the depreciation for the second year. Option D is incorrect because it is the depreciation for the third year.

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