Question

Timothy paid $14,850 for a used car 4 years ago. Because he did not properly maintain the car, he sold it for $3,960. What was his average annual depreciation?

Answer 1

Depreciation rate = 16.32%

Explanation:

First we calculate the annual depreciation of the car

Annual Depreciation = (Cost of car – Net Scrap Value of car)/Useful Life

Details

Cost of Car= $14850

Net scrap Value of car= $3,960

useful Life=4

Thus: Annual Depreciation = ($14850-$3,960)/4

= $2,722/year (Annual Depreciation)

Rate = Annual Depreciation/Cost of car X 100%

= $2,722/$14,850 X 100%

Depreciation rate = 16.32%