1
A vehicle is purchased for Rs. 800,000 and depreciated at 20% per annum as per company regulations. After 4 years, it is sold for Rs. 400,000. Determine the profit or loss incurred.
0:00
Solution: Step 1: Calculate the depreciated value of the vehicle after 4 years using the formula:
Depreciated Value = Original Value * (1 - Rate of Depreciation)^Number of Years
Given:
Original Value = Rs. 800,000
Rate of Depreciation = 20% per annum = 0.2
Number of Years = 4
Depreciated Value = 800,000 * (1 - 0.2)^4
Depreciated Value = 800,000 * (0.8)^4
Depreciated Value = 800,000 * 0.4096
Depreciated Value = Rs. 327,680
Step 2: Calculate the gain or loss by subtracting the depreciated value from the sale price:
Sale Price = Rs. 400,000
Gain/Loss = Sale Price - Depreciated Value
Gain/Loss = 400,000 - 327,680
Gain/Loss = Rs. 72,320
Therefore, there is a gain of Rs. 72,320.