Question
A machine is purchased for $100,000 and $10,000 is spent on its installation. Residual value of the machine is $9,000 and its useful life is 5 years. Calculate the rate of depreciation.
Solution
Depreciation each year = (Asset cost - salvage value)/useful life = (100,000 +10,000 - 9000)/5Â = 20,200 per year Depreciation rate = depreciation/cost =20,200/110,000 =18.36%
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