[amp_mcq option1=”The depreciated value of machine as on 1st January 1990 is Rs. 13,122. The cost of machine on 1st January 1990 was A. Rs. 20,000″ option2=”Rs. 18,000″ option3=”Rs. 22,000″ option4=”Rs. 19,000″ correct=”option1″]
The correct answer is: A. Rs. 20,000
The machine was purchased on 1st January 1987 and depreciated by written down value method at the rate of 10% P.A. The depreciated value of machine as on 1st January 1990 is Rs. 13,122. This means that the machine has depreciated by 68.78% in 3 years. The formula for calculating depreciation by written down value method is:
Depreciation = (Cost of asset – Salvage value) * Rate of depreciation
In this case, the salvage value is assumed to be zero. So, the depreciation is calculated as:
Depreciation = (Cost of asset – 0) * 10% = 10% of Cost of asset
The depreciated value of machine as on 1st January 1990 is Rs. 13,122. This means that the cost of the machine is 100/68.78 = Rs. 14.46 times the depreciated value. So, the cost of the machine is 14.46 * Rs. 13,122 = Rs. 20,000.
The other options are incorrect because they do not take into account the fact that the machine has depreciated by 68.78% in 3 years.