Depreciation - SS3 Mathematics Lesson Note
Depreciation is the loss in market value of items as time goes by. The depreciation value also known as the book value is a percentage of the value of the item at the beginning of the year.
Example 8 The value of a car depreciates by 20% of its value in the beginning of the each year. If the car cost N1.5 million, find the book value after 3 years.
Solution
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\[\mathbf{1}\mathbf{st}\mathbf{\ year:}\] |
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\[Value\ of\ car:\] |
\[N1,500,000\] |
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\[20\%\ depreciation:\] |
\[(\frac{20}{100} \times 1500000)\] |
\[N300,000\] |
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\[Value\ after\ one\ year:\] |
\[N1,200,000\] |
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\[\mathbf{2}\mathbf{nd}\mathbf{\ year:}\] |
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\[Value\ of\ car:\] |
\[N1,500,000\] |
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\[20\%\ depreciation:\] |
\[(\frac{20}{100} \times 1200000)\] |
\[N240,000\] |
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\[Value\ after\ 2\ years:\] |
\[N960,000\] |
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\[\mathbf{3}\mathbf{rd}\mathbf{\ year:}\] |
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\[Value\ of\ car:\] |
\[N960,000\] |
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\[20\%\ depreciation:\] |
\[(\frac{20}{100} \times 960000)\] |
\[N192,000\] |
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\[Value\ after\ 3\ years:\] |
\[N768,000\] |
\[Therefore,\ book\ value\ after\ 3\ years\ = \ N768,000\]