Asked by DANIEL RAMOS on Jun 15, 2024
Verified
Sarah bought a 7-year old car for $10,500.When the car was new,it sold for $21,000.Therefore,the depreciation rate is 9.4%.
Depreciation Rate
The rate at which an asset loses its value over time, often used for accounting and tax purposes.
- Calculate the effect of depreciation on vehicle value over time.
Verified Answer
SW
Sophia WhiteJun 18, 2024
Final Answer :
True
Explanation :
The calculation for depreciation rate is:
Depreciation Rate = ((Cost of asset - Residual value)/Cost of asset)) x 100%
Here,
Cost of asset = $21,000
Residual value = $0 (given)
Depreciation Rate = ((21,000-0)/21,000) x 100% = 100%
Since the car is 7 years old, the annual depreciation rate would be:
Annual Depreciation Rate = Depreciation Rate / Useful life
Useful life of a car is generally considered to be 10 years.
Annual Depreciation Rate = 100%/10 = 10%
Thus, the depreciation rate is not 9.4%, but is actually 10%.
Depreciation Rate = ((Cost of asset - Residual value)/Cost of asset)) x 100%
Here,
Cost of asset = $21,000
Residual value = $0 (given)
Depreciation Rate = ((21,000-0)/21,000) x 100% = 100%
Since the car is 7 years old, the annual depreciation rate would be:
Annual Depreciation Rate = Depreciation Rate / Useful life
Useful life of a car is generally considered to be 10 years.
Annual Depreciation Rate = 100%/10 = 10%
Thus, the depreciation rate is not 9.4%, but is actually 10%.
Learning Objectives
- Calculate the effect of depreciation on vehicle value over time.