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.

Answer 1

Let the original cost of the machine = Rs. 100.

∴ Depreciation during the 1^st year = 15% of Rs. 100 = Rs, 15.

Value of the machine at the beginning of the 2^nd year

= Rs.100 - Rs.15 = Rs. 85

∴ Depreciation during the 2^nd year = 15% of Rs. 85 = Rs. 12.75

Now, when depreciation during 2^nd year = Rs, 12.75,

original cost = Rs. 100

∴ when depreciation during 2^nd 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.