Depreciation help (1 Viewer)

[chooky_girl26]

could someone plz help me with the following question

6. calculate the length of time fo each of the following items to depriciate to the value given

I've tried them but can't get the right answer

a. A computer purchased for $5600 to depreciate to less than $1000 at $900 per year

b. An electric guitar purchased for $1200 to depreciate to less than $500 at $150 per year

c. An entertainment unit purchased for $6000 to become worthless at $750 per year

d. Office equptment purchased for $12000 to depreciate to less than $2500 at $1500 per year



any help would be appreciated
xoxox

 

[Trev]

a. A computer purchased for $5600 to depreciate to less than $1000 at $900 per year

[amount - [amount of depreciation*amount of years (unknown)] is less than 1000 ]
5600 - 900x < 1000
-900x < - 4600
900x > 4600 (sign swaps because you are dividing/multiplying by a negative)
x > 5.1... which means, where x is greater than 5.1 the amount of the computer will be less than 1000. Therefore, when x = 5; or after 5 years.

b. An electric guitar purchased for $1200 to depreciate to less than $500 at $150 per year
1200 - 150x < 500
-150x < -700
150x > 700
x > 4.6.... (same as before; when x/years is more than 4.6; the price of guitar will be less than 500).

It's the same process for the rest of the questions.

 

[PC]

For depreciation, you've got two methods:
• Straight line method (an item depreciates by the same AMOUNT each year)
Formula: S = Vo - Dn
• Declining balance method (an item depreciate by the same RATE (percentage) each year)
Formula: S = Vo(1 - r)^n

From your questions, it looks like each item depreciates by a set amount each year, so we'll use the straight line method.

Take the first question: A computer purchased for $5600 to depreciate to less than $1000 at $900 per year.

We know that the salvage value, S = $1000.
The original price of the item was Vo = $5600
And the annual amount of the depreciation is D = $900

Now use the formula:
S = Vo - Dn
1000 = 5600 - 900n
-4600 = -900n
n = 5.11

This means that it will take 6 years for the computer to fall below $1000. (After 5 years the value of the computer will still be above $1000.)

 

[chooky_girl26]

thank u

thanks so much guys... i really needed that help
cheers
xoxo

 

[Trev]

You can basically just figure it out by making up a little scenario involving small numbers and whatnot Don't mind me...