Calculating Depreciation of an Electric Bulb

This problem involves calculating the value of an item after one year, given its initial purchase price and a fixed annual depreciation rate. Depreciation is the decrease in the value of an asset over time due to wear and tear, obsolescence, or other factors.

Understanding Depreciation

Depreciation is typically calculated as a percentage of the asset's value. When the depreciation rate is given per annum (per year), we calculate the amount of depreciation for that specific year and subtract it from the value at the beginning of the year.

Given Information

• Initial cost of the electric bulb = Rs. 4200
• Depreciation rate = 8% per annum
• Time period = 1 year

Step-by-Step Calculation of Value After One Year

To find the value of the electric bulb after one year, we first need to calculate the amount of depreciation for that year.

Step 1: Calculate the depreciation amount for one year.

The depreciation is 8% of the initial value.

Depreciation Amount = 8% of Rs. 4200

Using the formula:

$$\text{Depreciation Amount} = \text{Initial Value} \times \frac{\text{Depreciation Rate}}{100}$$

Plugging in the values:

$$\text{Depreciation Amount} = 4200 \times \frac{8}{100}$$

$$\text{Depreciation Amount} = 42 \times 8$$

$$\text{Depreciation Amount} = 336$$

So, the depreciation amount for one year is Rs. 336.

Step 2: Calculate the value of the bulb after one year.

The value after one year is the initial value minus the depreciation amount for that year.

Value after 1 year = Initial Value - Depreciation Amount

Value after 1 year = Rs. 4200 - Rs. 336

Value after 1 year = Rs. 3864

The value of the electric bulb after one year will be Rs. 3864.

Comparing with Options

Let's compare our calculated value with the given options:

Our calculated value of Rs. 3864 matches Option 3.

Revision Table: Depreciation Calculation

Additional Information: Types of Depreciation Methods

While this problem uses a simple percentage calculation, in accounting and finance, there are different methods to calculate depreciation over an asset's useful life:

• Straight-Line Method: The depreciation amount is the same each year. Formula: (Cost - Salvage Value) / Useful Life.
• Declining Balance Method: An accelerated method where depreciation is higher in the early years and lower later. Often uses a multiple of the straight-line rate.
• Sum-of-the-Years'-Digits Method: Another accelerated method.
• Units-of-Production Method: Depreciation is based on the asset's usage rather than time.

This specific problem uses the simple percentage method applied for just one year, which is a straightforward calculation of the first year's depreciation.