A company purchases a machine for rs.50,000. it is estimated that the machine depreciates in its value at a rate of 15% per year. what will be its value after 15 years?
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It is given that the machine depreciates its value at a rate of 15% Per year which can be used as a criteria to determine the method of depreciation...
In straight line method of depreciation ..the amount of depreciation is fixed for each year...
whereas in Reducing balance method the rate of depreciation is fixed ..
So going by the information given in the question
we can come to conclusion that the method used is Reducing balance method..(Ref - It is given that the machine depreciates its value at a rate of 15% Per year)
Given time = 15 years
Rate = 15%
Cost price of machine = 50000
the value after 15 years will be
=c(1-i)^15
= 50000(1-15%)^15
=50000(1-0.15)^15
=50000(0.087354219)
=4367.7 is the value at the end of 15 years
In straight line method of depreciation ..the amount of depreciation is fixed for each year...
whereas in Reducing balance method the rate of depreciation is fixed ..
So going by the information given in the question
we can come to conclusion that the method used is Reducing balance method..(Ref - It is given that the machine depreciates its value at a rate of 15% Per year)
Given time = 15 years
Rate = 15%
Cost price of machine = 50000
the value after 15 years will be
=c(1-i)^15
= 50000(1-15%)^15
=50000(1-0.15)^15
=50000(0.087354219)
=4367.7 is the value at the end of 15 years
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