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4 October, 08:42

Suppose that you are asked to derive the depreciation rate for a house on rural property. The contributory value of the house is $50,000, the replacement cost is estimated to be $80,000, and its effective age is 10 years. Calculate the annual percentage depreciation for this house.

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  1. 4 October, 08:46
    0
    Percentage depreciation = 16.25%

    Explanation:

    Property value = Contributory value + replacement cost

    = $50000 + $80000 = $130000

    Depreciation = $130000 / 10 = $13000

    Percentage depreciation = 13000 / 80000 = 16.25%
  2. 4 October, 09:11
    0
    3.75%

    Explanation:

    To calculate the depression rate

    We would use this method

    Annual Depreciation = (Cost of Asset - Net Scrap Value) / Useful Life

    Cost of assets is = $80,000

    Net scrap value = $50,000

    Useful life = 5years

    Substituting the values into the equation we have

    Annual depreciation = (80000-50000)

    Annual depression = $30000/10

    Annual depression = $3000

    Rate % = annual depression / costs of assets

    Rate % = 3000/80000

    Rate % = 0.0375

    Rate % = 0.0375 * 100%

    Rate = 3.75%
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