10. The new ford ranger was bought for $87,000. An insurance company decides to calculate its depreciation per annum as 5%. Find:

Question

a) Its book value after 3 years.

b) The amount by which it depreciated for the same time period.

Answer 1

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.