GATE 2024 CE (CE1) – Question 51
The initial cost of an equipment is Rs. 1,00,000. Its salvage value at the end of accounting life of 5 years is Rs. 10,000. The difference in depreciation (in Rs.) computed using 'double-declining balance method' and 'straight line method' of depreciation in Year-2 is _____________ (in positive integer).
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Correct answer: 6000
Explanation
The double-declining balance rate is $\frac{2}{5} = 40\%$ of the book value at the start of the year. Year 1: $0.4 \times 100000 = 40000$, so the book value is 60000. Year 2: $0.4 \times 60000 = 24000$. The straight-line depreciation is $\frac{100000 - 10000}{5} = 18000$ per year. The difference in year 2 is $24000 - 18000 = 6000$.