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2 votes
2 votes
2 ABC Company has a large piece of equipmentthat cost $85,600 when it was first purchased 6years ago. The current value of the equipment is$30,400. What is the average depreciation of theequipment per year?F. $ 5,800G. $ 9,200H. $15,200J. $27,600K. $42,800

User Ali Malek
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1 Answer

15 votes
15 votes

The intial cost of the equipment is C, which is given as 85,600.

The present value is PV, which is given as 30,400.

This simply means the total depreciation over the last 6 years can be derived as;

Depreciation = C - PV

Depreciation = 85600 - 30400

Depreciation = 55200

However, the method of depreciation is not given/specified, and hence the question requires that you calculate the average depreciation per year. That is, the total depreciation would be evenly spread over the 6 year period (which assumes that the depreciation per year is the same figure)

Average depreciation = Total depreciation/6

Average Depreciation = 55200/6

Average Depreciation = 9200

The correct option is option G: $ 9,200

User Luca Torella
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