Question

A machine costing Rs.80,000 would reduce to Rs.20,000 in 8 years. Find the rate of yearly depreciation, given that the depreciation is calculated using diminishing balances method.

Answer 1

rate of yearly depreciation is 15.91 %

Explanation:

given data

machine cost = Rs 80000

reduce = Rs 20000

time t = 8 year

to find out

rate of yearly depreciation

solution

we will apply here rate of yearly depreciation formula that is

rate of yearly depreciation = 1 -
`(reduce)/(cost) ^(1/t)` × 100 ..............1

put here all these value we get rate of yearly depreciation

rate of yearly depreciation = 1 -
`(reduce)/(cost) ^(1/t)` × 100

rate of yearly depreciation = 1 -
`(20000)/(80000) ^(1/8)` × 100

rate of yearly depreciation = 15.91 %

so rate of yearly depreciation is 15.91 %