10. The new ford ranger was bought for $87,000. An insurance company decides to calculate its depreciation per annum as 5%. Find:
a) Its book value after 3 years.
b) The amount by which it depreciated for the same time period.
a) To calculate the book value after 3 years, we need to find 95% of the original price for each year.
Year 1: $87,000 * 0.95 = $82,650
Year 2: $82,650 * 0.95 = $78,517.50
Year 3: $78,517.50 * 0.95 = $74,591.63
Therefore, the book value after 3 years is $74,591.63.
b) To find the amount by which it depreciated for the same time period, we subtract the book value after 3 years from the original price.
Depreciation = $87,000 - $74,591.63 = $12,408.37
Therefore, the amount by which it depreciated for the same time period is $12,408.37.
To calculate the book value of the new Ford Ranger after 3 years, we need to subtract the accumulated depreciation from the initial purchase price.
a) Accumulated Depreciation = Initial Purchase Price * Depreciation Rate * Number of Years
= $87,000 * 0.05 * 3
= $13,050
Book Value = Initial Purchase Price - Accumulated Depreciation
= $87,000 - $13,050
= $73,950
Therefore, after 3 years, the book value of the new Ford Ranger would be $73,950.
b) The amount by which it depreciated for the same time period can be calculated by subtracting the book value after 3 years from the initial purchase price.
Depreciation Amount = Initial Purchase Price - Book Value
= $87,000 - $73,950
= $13,050
Hence, the amount by which the new Ford Ranger depreciated over the same time period is $13,050.