The original cost of an equipment is Rs.10,000. Its salvage value at the end of its total useful life of five years is Rs. 1,000. Its book value at the end of two years of its useful life (as per straight line method of evaluation of depreciation) will be A. Rs. 8,800 B. Rs. 7,600 C. Rs. 6,400 D. Rs. 5,000

The correct answer is: C. Rs. 6,400

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 useful life. The formula for calculating depreciation using the straight-line method is:

Depreciation = (Cost – Salvage value) / Useful life

In this case, the cost of the asset is Rs. 10,000, the salvage value is Rs. 1,000, and the useful life is 5 years. Therefore, the depreciation for each year is:

Depreciation = (10,000 – 1,000) / 5 = 1,800

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

Book value = Cost – Depreciation

= 10,000 – (2 x 1,800) = 6,400

The other options are incorrect because they do not take into account the salvage value of the asset.