Question

Suppose that you are asked to derive the depreciation rate for a house on rural property. The contributory value of the house is $50,000, the replacement cost is estimated to be $80,000, and its effective age is 10 years. Calculate the annual percentage depreciation for this house.

Answer 1

Answer:

Percentage depreciation = 16.25%

Explanation:

Property value = Contributory value + replacement cost

= $50000 + $80000 = $130000

Depreciation = $130000 / 10 = $13000

Percentage depreciation = 13000 / 80000 = 16.25%

Answer 2

Answer:

3.75%

Explanation:

To calculate the depression rate

We would use this method

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

Cost of assets is = $80,000

Net scrap value = $50,000

Useful life = 5years

Substituting the values into the equation we have

Annual depreciation = (80000-50000)

Annual depression = $30000/10

Annual depression = $3000

Rate % = annual depression /costs of assets

Rate % = 3000/80000

Rate % = 0.0375

Rate % = 0.0375 × 100%

Rate = 3.75%