Q10: Gulf Agrotech Ltd. purchases a machinery which costs RO 40,000. The useful life of the machine is 6 years and the annual rate of depreciation is 10% per annum, depreciation being calculated on diminishing balance method (WDV). After 6 years, company decided to buy the new advanced machine for RO 60,000. The machine supplier agrees to buy the old machine at the scrap value.

a) How much amount Gulf Agrotech needs to pay to buy the new machine in exchange of the old machine scrap?

b) Depreciation is an expense for the business organization. Discuss with reasons