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Question
Mr. Chetan purchased furniture for her home at Rs.5,12,000/-. Considering the rate of depreciation as 12.5%, what will be the value of furniture after 3 years.
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Solution
Given, purchase price of furniture = V
= ₹ 5,12,000/-
Rate of depreciation = r = 12.5%
Number of years = n = 3 years
∴ Value of furniture after 3 years = V`(1 - "r"/100)^"n"`
= `5,12,000(1 - 12.5/100)^3`
= `5,12,000(1 - 1/8)^3`
= `5,12,000(7/8)^3`
= `5,12,000 xx 343/512`
= 3,43,000
∴ The value of furniture will be ₹ 3,43,000/-
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In accounting, which principle is followed by charging depreciation each year?
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