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Annuity Method of Depreciation

A firm purchased a 5-year lease for Rs. 30,000 and decided to depreciate it using the annuity method with an interest rate of 5% per year. Using an annuity table showing that an annuity of Re. 1 for 5 years at 5% is 0.230975, the document calculates that the annual depreciation to charge is 0.230975 x 30,000 = Rs. 6,929.25.

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704 views1 page

Annuity Method of Depreciation

A firm purchased a 5-year lease for Rs. 30,000 and decided to depreciate it using the annuity method with an interest rate of 5% per year. Using an annuity table showing that an annuity of Re. 1 for 5 years at 5% is 0.230975, the document calculates that the annual depreciation to charge is 0.230975 x 30,000 = Rs. 6,929.25.

Uploaded by

SaravananSrvn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Annuity Method of Depreciation

Periodic payment required to amortize Re. 1 and interest An extract of an Annuity Table

A firm purchases a 5-year lease for Rs.30, 000. It decided to write off depreciation on the annuity
method, presuming the rate of interest to be 5% per annum. If annuity of Re. 1 for 5 years at 5% is
0.230975, show the Lease Account for full period.

Solution: The amount of depreciation to be charged every year = 0.230975 x 30000 = Rs.6, 929.25

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