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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.
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Solution
Let original value of machine = Rs. 100
For 1st year
P = Rs. 100; R = 12% and T = 1 year
Depreciation in 1st year = Rs `[100 xx 12 xx 1]/[100]` = Rs.12
Value at the end of 1st year = Rs. 100 - Rs. 12 = Rs. 88
For 2nd year
P = Rs. 88; R = 12% and T = 1 year
Depreciation in 2nd year = Rs.`[88 xx 12 xx 1]/[100]` = Rs. 10.56
When depreciation in 2nd year is Rs.10.56, original cost is Rs.100
When depreciation in 2nd year is Rs.2,640, original cost = `[100 xx 2640 ]/[10.56]` = Rs. 25,000
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