An office equipment depreciates at 15% per annum. If the cost is GH₵ 1,200.00 when new, find the value after three years.
Method I
Depreciation
A = P(1 - r)n
Where A = value at end of the n years
P = Initial amount
r = rate of depreciation
P = 1200
r = = 0.15
n = 3
A = 1200(1 - 0.15)3
A = 1200(0.85)3
A = 1200 x 0.853
A = 736.95
∴ value at the end of three years = GH₵ 736.95
Method II
Depreciation
Depreciated Amount = Depreciation rate x Amount
Value at end of the year = Amount - Depreciated Amount
Depreciation rate = 15%
First Year
Amount = GH₵ 1,200
Depreciated amount = x GH₵ 1200 = GH₵ 180
Value at end of year = GH₵ 1200 - GH₵ 180
Value at end of year = GH₵ 1020
Second Year
Amount = GH₵ 1020
Depreciated amount = x GH₵ 1020 = GH₵ 153
Value at end of year = GH₵ 1020 - GH₵ 153
Value at end of year = GH₵ 867
Third Year
Amount = GH₵ 867
Depreciated amount = x GH₵ 867 = GH₵ 130.05
Value at end of year = GH₵ 867 - GH₵ 130.05
Value at end of year = GH₵ 736.95
