Question

The cost price of a machine is 2,50,000. If the rate of depreciation is 10% per year, find the depreciation in price of the machine after two years.

Answer 1

Here, P = Cost price of the machine = 2,50,000

A = Cost price after 2 years

I = Depreciation in price after 2 years

R = Rate of depreciation = 10 %

N = 2 years

A = P `(1 + "R"/100)^"N"`

= 2,50,000 `(1 + (-10)/100)^2`

= 2,50,000 `(1 - 1/100)^2`

= 2,50,000 `((100 - 10)/100)^2`

= 2,50,000 `(90/100)^2`

= 2,50,000 `(9/10)^2`

= 2,50,000 `(81/100)`

= 2,500 × 81

= 2,02,500

Depreciation in price = Cost price (P) – Depreciated price (A)

= 2,50,000 − 2,02,500

= 47,500

∴ The depreciation in the price of the machine after 2 years would be 47,500.