Willard Business Services purchased three assets with the following characteristics: $\begin{array}{lrrr}
&&\text { Residual }\
\text { Asset } & \text { Cost } & \text { Value } & \text { Life }\
\text { Photocopier } & \$ 12,000 & \$ 2,000 & 10 \text { year } \
\text { Computer } & 6,800 & 1,200 & 4 \text { yerr } \
\text { Typewriter } & 1,500 & 250 & 5 \text { year }
\end{array}$ Assuming Willard uses straight-line depreciation, the composite depreciation rate is

Question

Quizplus · Accepted Answer

The composite depreciation rate is calculated by dividing the total annual depreciation by the total cost of the assets. First, calculate the annual depreciation for each asset: - Photocopier: $(\$12,000 - \$2,000) / 10 = \$1,000$ per year- Computer: $(\$6,800 - \$1,200) / 4 = \$1,400$ per year- Typewriter: $(\$1,500 - \$250) / 5 = \$250$ per yearTotal annual depreciation = \$1,000 + \$1,400 + \$250 = \$2,650Total cost of the assets = \$12,000 + \$6,800 + \$1,500 = \$20,300Composite depreciation rate = $(\$2,650 / \$20,300) \times 100 = 13.05\%$, which rounds to 13.1%.

Willard Business Services Purchased Three Assets with the Following Characteristics