Question

The cost of a machine is supposed to
depreciate each year by 12% of its value at
the beginning of the year. If the machine is
valued at 44,000 at the beginning of 2008,
find its value :
(i) at the end of 2009.
(ii) at the beginning of 2007.​

Answer 1

i) The cost of machine depreciates at the beginning of next year, or we can say at the end of each year, so

Value at the end 2009 = Value at the beginning of 2010

So, Value @ beginning of 2008 = 44000

Value @ beginning of 2009 = 88% of 44000 = 0.88 (44000)

Value @ beginning of 2010 = 88% of 0.88 (44000) = 0.88² (44000)

= 0.7744 (44000)

= 34073.6

ii) Let Value of machine at the beginning of 2007 be V, so

Value of machine at the beginning of 2008 = 0.88 V

0.88 V = 44000

V = 50000

Therefore, Value of machine at the beginning of 2007 was 50000.