In 2003, the price of a certain automobile was approximately $30,100 with a depreciation of...

Question:

In 2003, the price of a certain automobile was approximately $30,100 with a depreciation of $2,250 per year.

After how many years will the car's value be $12,100?

Depreciation:

Depreciation is a non-cash expense allowed in the profit and loss statement as a way of writing off acquisition costs. There are different methods for depreciation acquisition costs. Some of the methods include straight-line method, double decline balance, units of production, the sum of years digits and modified accelerated recovery cost system (MARCS). In order to enjoy depreciation tax benefits, a company is required to use MARCS to write off the acquisition costs.

Answer and Explanation:

The number of years can be determined using the following formula.

  • {eq}Number\ of\ years = \frac{Accumulated\ depreciation}{Depreciation\ per\ year} {/eq}


We will use the following formula to determine the accumulated depreciation.

  • {eq}Cost - Accumulated\ depreciation = Book\ value {/eq}

Therefore,

  • {eq}$30,100 - Accumulated\ depreciation = $12,100 {/eq}

We solve for Accumulated depreciation

  • {eq}$30,100 - $12,100 = Accumulated\ depreciation {/eq}
  • {eq}$18,000 = Accumulated\ depreciation {/eq}


The number of years is calculated as follows.

  • {eq}Number\ of\ years = \frac{\$18,000}{\$2,250} {/eq}
  • {eq}Number\ of\ years = 8 {/eq}

After 8 years, the car value will be $12,100


Learn more about this topic:

Loading...
Methods of Depreciation

from Business 110: Business Math

Chapter 6 / Lesson 1
18K

Related to this Question

Explore our homework questions and answers library