Financial maths - Straight line depreciation.
Test Yourself 1.
| Future value. | 1. A new car depreciates by $1,150 each year.
What is the value of a car purchased for $28,000: Answer.(i) after 1 year: $26,850. (ii) after 5 years: $22,250. |
| 2. A photocopier in an office was purchased for $5,400. For inventory control, its value can be decreased by $725 per year.
What is the book value of the photocopier after 4 years? Answer.Value after 4 years = $2,500. |
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| 3. A gardening company buys 5 lawnmowers at a cost of $849 each. The book value of each of these mowers decreases by $210 per year.
What is the combined value of the five lawnmowers after 4 years? Answer.Value after 4 years = $45 - so no real value. |
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| Present value. | 4. A five year old bike is currently valued at $220. It has been depreciated by $105 per year.
What was its original purchase price? Answer.Value 5 years ago was $745. |
| 5. A second-hand car purchased six years ago is now valued at $2,670. When a straight line depreciation is applied, it is determined that the car has depreciated $1,245 each year.
What was the cost of the car when it was purchased? Answer.Value 4 years ago was $10,140. |
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| 6. A production machine to make widgets is presently worth $425,000. It depreciates at $78,000 per year.
What was the original price of the machine when purchased three years ago? Answer.Value 3 years ago was $659,000. |
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| Rate of depreciation. | 7. A machine was purchased for $125,000 on 24 June last year. On 24 June this year, the value of the machine is $100,000.
What is the rate of depreciation for this machine? Answer.(25,000/125,000)*100 = 20%. |
| 8. A tax consultant informs a Company Manager that the depreciated cost of office furniture can be claimed annually as a tax deduction.
The Office furniture was originally purchased five years ago for $10,000. The value of the furniture now is $6,000. Determine the annual rate of depreciation of the furniture given that the furniture depreciated at the same rate each year. Answer. Depreciates at the rateof $800 per year. |
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9. In 2019, some equipment in a factory was purchased for $58,650. In 2021, that equipment was valued at $22,287. What is the annual rate of depreciation for the equipment? Answer.Rate = $18181.50 p.a. |
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| Number of periods. | 10. An item reduces in value from $69,000 to $27,000 at an annual rate of depreciation of $7,000.
Over how many years did the item depreciate to $27,000? Answer.6 years. |
| 11. An animated square reduced its side length from 14 cm to 7 cm by 1.4 cm/sec.
How many seconds did the reduction take? Answer.5 seconds. |
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| 12. A Dogecoin crypto currency unit reduced in value by 3.2 cents per hour from 82.0c to 46.8c.
How many hours did this reduction take? Answer.11 hours. |