Gr 11 Math Ch 9: Simple and Compound Depresiation
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Questions and Answers

What is the formula for calculating the book value of an asset using simple depreciation?

  • $A = P(1 - i)$
  • $A = P(1 - in)$ (correct)
  • $A = P(1 + in)$
  • $A = P(1 + i)^n$
  • What is a key characteristic of compound depreciation?

  • The book value increases exponentially over time.
  • The depreciation amount remains the same every year.
  • The depreciation amount changes each year, decreasing as the asset's value decreases. (correct)
  • The asset's value becomes zero at the end of its useful life.
  • How do you find the annual depreciation rate (i) for simple decay?

  • Rearrange the formula to solve for i. (correct)
  • Use the formula A = P(1 + in) to find i.
  • Rearrange the formula to solve for A.
  • Rearrange the formula to solve for P.
  • What is the relationship between the initial value, final value, and depreciation rate in simple decay?

    <p>Linear</p> Signup and view all the answers

    What is the formula for calculating the total depreciation for simple depreciation?

    <p>P × i × n</p> Signup and view all the answers

    What happens to the book value of an asset over time using compound depreciation?

    <p>It follows an exponential decay pattern.</p> Signup and view all the answers

    What is a key difference between simple and compound depreciation?

    <p>Simple depreciation calculates depreciation on the initial principal amount, while compound depreciation calculates depreciation on the remaining value of the asset.</p> Signup and view all the answers

    Why can't the book value of an asset ever reach zero using compound depreciation?

    <p>Because the formula A = P(1 - i)^n ensures that the book value never reaches zero.</p> Signup and view all the answers

    What is the primary difference between simple and compound depreciation?

    <p>Simple depreciation calculates depreciation on the initial principal amount, while compound depreciation calculates it on the remaining value of the asset.</p> Signup and view all the answers

    If an asset has a principal amount of $10,000 and a depreciation rate of 10%, what is its book value after 2 years using simple depreciation?

    <p>$7,200</p> Signup and view all the answers

    What is the total depreciation of an asset with a principal amount of $8,000, a depreciation rate of 15%, and a time period of 5 years using simple depreciation?

    <p>$6,750</p> Signup and view all the answers

    Which of the following statements is true about compound depreciation?

    <p>The depreciation amount decreases each year.</p> Signup and view all the answers

    If an asset has a principal amount of $12,000 and a depreciation rate of 12%, what is its book value after 3 years using compound depreciation?

    <p>$8,448</p> Signup and view all the answers

    What is the purpose of finding the annual depreciation rate (i) in depreciation calculations?

    <p>To determine the depreciation rate required to achieve a specific book value.</p> Signup and view all the answers

    Which of the following is a characteristic of simple depreciation?

    <p>The total depreciation can be calculated as P × i × n.</p> Signup and view all the answers

    What is the result of rearranging the simple depreciation formula to solve for i?

    <p>A linear equation.</p> Signup and view all the answers

    If an asset has a principal amount of $15,000 and a depreciation rate of 8%, what is its book value after 4 years using simple depreciation?

    <p>$9,600</p> Signup and view all the answers

    What is the total depreciation of an asset with a principal amount of $18,000, a depreciation rate of 12%, and a time period of 6 years using compound depreciation?

    <p>$7,344</p> Signup and view all the answers

    An asset has a principal amount of $20,000 and a depreciation rate of 10%. If the book value after 5 years is $12,832, what type of depreciation is being used?

    <p>Compound depreciation</p> Signup and view all the answers

    What is the relationship between the initial value, final value, and depreciation rate in compound decay?

    <p>Exponential</p> Signup and view all the answers

    An asset has a principal amount of $25,000 and a depreciation rate of 15%. If the book value after 3 years is $17,421.88, what is the total depreciation?

    <p>$7,578.12</p> Signup and view all the answers

    What is the depreciation rate of an asset with a principal amount of $30,000, a book value of $21,952.38 after 4 years, and a depreciation method of compound decay?

    <p>12%</p> Signup and view all the answers

    An asset has a principal amount of $22,000 and a depreciation rate of 18%. If the book value after 2 years is $15,808.64, what is the depreciation amount for the second year?

    <p>$3,116.16</p> Signup and view all the answers

    What is the book value of an asset with a principal amount of $28,000, a depreciation rate of 12%, and a time period of 5 years using simple depreciation?

    <p>$16,896</p> Signup and view all the answers

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