A machine costs ₹ 45,000 with an estimated useful life of 5 years and a scrap value of ₹ 10,000. The annual depreciation of the machine is :
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Step-by-Step Solution
Step 1: Identify given values
First, we identify the given values from the problem statement: the initial cost of the machine, its scrap value, and its estimated useful life in years.
Step 2: Calculate total depreciation
The total depreciation over the machine's useful life is the difference between its initial cost and its scrap value. We subtract the scrap value from the cost of the machine to find this amount.
Step 3: Calculate annual depreciation
To find the annual depreciation, we divide the total depreciation by the useful life of the machine. This assumes a straight-line method of depreciation, where the depreciation amount is spread evenly over the useful life.