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Question
The cost price of a machine is 2,50,000. If the rate of depreciation is 10% per year, find the depreciation in price of the machine after two years.
Solution
Here, P = Cost price of the machine = 2,50,000
A = Cost price after 2 years
I = Depreciation in price after 2 years
R = Rate of depreciation = 10 %
N = 2 years
A = P `(1 + "R"/100)^"N"`
= 2,50,000 `(1 + (-10)/100)^2`
= 2,50,000 `(1 - 1/100)^2`
= 2,50,000 `((100 - 10)/100)^2`
= 2,50,000 `(90/100)^2`
= 2,50,000 `(9/10)^2`
= 2,50,000 `(81/100)`
= 2,500 × 81
= 2,02,500
Depreciation in price = Cost price (P) – Depreciated price (A)
= 2,50,000 − 2,02,500
= 47,500
∴ The depreciation in the price of the machine after 2 years would be 47,500.
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