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Question
A manufacturer estimates that his machine depreciates by 15% of its value at the beginning of the year. Find the original value (cost) of the machine, if it depreciates by Rs. 5,355 during the second year.
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Solution
Let the original cost of the machine = Rs. 100.
∴ Depreciation during the 1st year = 15% of Rs. 100 = Rs, 15.
Value of the machine at the beginning of the 2nd year
= Rs.100 - Rs.15 = Rs. 85
∴ Depreciation during the 2nd year = 15% of Rs. 85 = Rs. 12.75
Now, when depreciation during 2nd year = Rs, 12.75,
original cost = Rs. 100
∴ when depreciation during 2nd year = Rs. 5,355.
Original cost = Rs. `100/12.75 xx 5,355` = Rs. 42,000.
Hence, original cost of the machine is Rs. 42,000.
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