Question

7. A building crane was purchased by a construction company for $450 000 and is

expected to have a useful life for 19 years. Calculate the crane's value at the end of
16 years of service if its recemmended straight-line depreciation rate is 5.0% per
annum.

Answer 1

$90000

Explanation:

The crane's value at the end of 16 years of service using straight-line depreciation can be calculated by using

D=
`(Prt)/(100)`

where:

D= the current value of the crane

P = the initial purchase price of the crane

r = the annual depreciation rate as a decimal

t = the number of years the crane has been in use

In this case, we have:

P = $450,000

r = 5.0% = 0.05

t = 16 years

Substituting these values into the formula, we get:

V = $450,000*0.05*16= $360000

Thus the crane depreciates by an amount of $360000 over 16 years.

Therefore, the crane's value at the end of 16 years of service using straight-line depreciation is $450,000- $360000=$90000