Question

Calculate the annual percentage depreciation of a machine using the constant percentage method, if purchasing cost is rs. 12,000 and scrap value is rs 3,000 and the life of the machine is 8 years.

Answer 1

Answer: The annual percentage depreciation of machine is 9.37%.

Explanation:  Given that the machine's purchase cost is Rs.12000, scrap value is Rs.3000 and the life of the machine is 8 years.

Step 1. We are to find the annual depreciation.

$\textup{Cost of the machine}=12,000\\\\\textup{Scrap value}=3,000\\\\\textup{Estimated useful life}=8 years.$

$\textup{Annual depreciation}\\\\\\=\dfrac{\textup{Cost of asset}-\textup{Net scrap value}}{\textup{useful life}}\\\\\\=\dfrac{12000-3000}{8}\\\\\\=\dfrac{9000}{8}\\\\=1125.$

Step 2. Now we are to find the percentage of annual depreciation.

$\textup{Annual depreciation in percentage}\\\\\\=\dfrac{\textup{Annual depreciation}}{\textup{Cost of asset}}\times{100}\\\\\\=\dfrac{1125}{12000}\times{100}\\\\={9.37}\%.$

Thus, the annual percentage depreciation of machine is 9.37%.