Question

The cost of a machine is supposed to depreciate each year by 12% of its value at the beginning of the year. If the machine is valued at Rs. 44,000 at the beginning of 2008, find its value :

(i) at the end of 2009.

(ii) at the beginning of 2007.

Answer 1

I) The cost of machine depreciates at the beginning of next year, or we can say at the end of each year, so
Value at the end of 2009 = Value at the beginning of 2010
So, Value at the beginning of 2008 = Rs 44000
Value at the beginning of 2009 = 88% of 44000 = 0.88 (44000)

Value at the beginning of 2010 = 88% of 0.88 (44000) = ${0.88}^2\times \left(44000\right)$

= 0.7744 (44000)

= Rs 34073.6

ii) Let Value of machine at the beginning of 2007 be V, so
Value of machine at the beginning of 2008 = 0.88 V

0.88 V = 44000
V = Rs 50000
Therefore, Value of machine at the beginning of 2007 was Rs 50000.