Question

A company buys computers at a cost of 4 million. They expect to replace the computers at the end of 4 years. What annually rate of depreciation will be used if the computers are discarded at the end of 4 years (i.e you may assume that the computers have no resale value) ?

Answer 1

Write down the depreciated value of the computers year by year for the 4 years

Answer 2

To find the annually rate of depreciation, we need to divide the cost of the computers by the number of years they are expected to last.

Depreciation per year = Cost of computers / Number of years

Depreciation per year = 4,000,000 / 4 = 1,000,000

Therefore, the annually rate of depreciation used for the computers is $1,000,000.

Answer 3

Year 1: $4,000,000 - $1,000,000 = $3,000,000
Year 2: $3,000,000 - $1,000,000 = $2,000,000
Year 3: $2,000,000 - $1,000,000 = $1,000,000
Year 4: $1,000,000 - $1,000,000 = $0