TURORIAL 9: DEPRECIATION

1. A new car is priced at RM125,000. The life expectancy of the car is 15 years and the scrap
value is RM25,000. Find the depreciation rate using the declining balance method. (10.17%)

2. A Xerox machine was purchase for RM55,000. It has an estimated useful life of 10 years with
a scrap value of RM15,000. Compute the depreciation for the fifth year using the straight
line method. (RM4000)

3. A car is purchase for RM53,500. It is estimated that it’s salvage value at the end of 8 years
will be RM6,000.
a) Prepare a depreciation schedule for the first 4 years using the straight line method.
(Annual depreciation=RM5937.50)
b) Using declining balance method, calculate the annual rate of depreciation and the
book value of the car at the end of fifth year. (RM13629.44)

4. The cost of a new machine is RM75,000. It is estimated to have a useful life of 5 years with a
scrap value of RM15,000. Calculate the book value and the accumulated depreciation of the
machine at the end of 3 years using
a) The declining balance method. (RM28557.21, RM46442.79)
b) The straight line method. (RM39000, RM36000)

5. A senior executive bought a car for RM135,000. the car was estimated to have a scrap value
of RM40,000 after 10 years. Construct a depreciation schedule for the first three years using
the straight line method.

6. A factory purchased a new machine for RM120,000. The machine has an expected life of 15
years. If the scrap value of the machine is RM15,000, calculate the book value after 6 years
using declining balance method.

7. Delicious Bakery bought a microwave oven at RM17,000. It is estimated to last for 7

years and has a salvage value of RM3,000.
a) Find the book value of that oven after 3 years by using the straight line method.
(RM11,000)
b) Find the annual rate of depreciation by using the declining balance method.
(21.95%)

8. An equipment has a scrap value of RM6000 at the end of 8 years. The book value at the end
of 6 years is RM7000. Using the straight line method, find the cost of the machine.
(RM10000)

9. Zaidi owns a new machine that costs RM20000. He estimates that the machine will
depreciate at an annual rate of 20.6%. Using the declining balance method of depreciation,
find how long does it takes for the machine to have a book value of RM5000. (6 years)

10. Cost of a machine is RM78000 with 20 years of life expectancy. The difference between the
book values of the machine at the end of seventh year and at the end of eight year is
RM2700. Use the straight line method to find the machine’s scrap value. (RM24000)

11. A van which costs RM78000 has an expected life of 10 years and a salvage value of
RM7000. Find the book value of the van after 4 years using
a) The straight line method. (RM49600)
b) The declining balance method. (RM29740.12)