Most assets decrease in value over time and depending on the condition they are in (the wear); this decrease in value is called depreciation.
To find the amount by which an asset depreciates over a year, the rate of depreciation (the percentage by which it decreases) is multiplied by the initial cost of the asset, the depreciation amount (the product obtained) is then subtracted from the initial cost to give the current book value of the asset.
For example, a Blackberry Bold 9780 is purchased for $460, if its depreciation is calculated as 5% per annum, what is its book value after a year?
The Initial cost of the asset, P = $460
The rate of depreciation, R = 5%
To find the depreciation of an asset for a period greater than one year, do the following:
-Find the book value using the formula,
-Find the depreciation amount by using the formula,
By amending the example above, we have, a Blackberry Bold 9780 is purchased for $460, if its depreciation is calculated as 5% per annum, find the amount by which it depreciates over 3 years?