Question

During every financial year, the value of a machine depreciates by 12%. Find the original cost of a machine which depreciates by Rs. 2,640 during the second financial year of its purchase.

Answer 1

Let original value of machine = Rs. 100
For 1^st year
P = Rs. 100; R = 12% and T = 1 year
Depreciation in 1^st year = Rs `[100 xx 12 xx 1]/[100]` = Rs.12

Value at the end of 1^st year = Rs. 100 - Rs. 12 = Rs. 88

For 2^nd year

P = Rs. 88;  R = 12% and T = 1 year

Depreciation in 2^nd year = Rs.`[88 xx 12 xx 1]/[100]` = Rs. 10.56

When depreciation in 2^nd year is Rs.10.56, original cost is Rs.100

When depreciation in 2^nd year is Rs.2,640, original cost = `[100 xx 2640 ]/[10.56]` = Rs. 25,000