Verified answer

[tex]Depreciation \\ \\ = \frac{Cost \: price - scrap \: value}{Useful \: life \: of \: an \: asset} [/tex]

[tex]Rate \: of \: depreciation \\ \\ = \frac{Depreciation \: value}{Cost \: price \: of \: asset} [/tex]

[tex]Where,[/tex]

[tex] Cost \: price = Rs. 50,000 \\ \\ Scrap \: value = Rs. 10,000 \\ \\ Useful \: life \: of \: asset \\ = 10 \: years[/tex]

[tex]Depreciation \\ \\ = \frac{Rs. \: (50,000 - 10,000)}{10 \: years} \\ \\ Depreciation = Rs. \: 4,000[/tex]

[tex]Rate \: of \: depreciation \\ \\ = Rs. \: ( \frac{4,000}{50,000} ) \times 100 \\ \\ = \frac{4,00,000}{50,000} \\ \\ = 8\%[/tex]

Answer:

The formula for straight-line depreciation is: \(\text{Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Useful Life}}\).

Given:

Cost of asset = $50,000

Residual value = $10,000

Useful life = 10 years

The annual depreciation expense would be: \(\frac{50,000 - 10,000}{10} = \frac{40,000}{10} = 4,000\) per year.

The depreciation rate per year is the depreciation expense divided by the cost of the asset: \(\frac{4,000}{50,000} = 0.08\) or 8%.

**Journal Entries:**

1. **At the time of purchase on 1.1.2016:**

```

Jan 1, 2016:

Asset Account $50,000

Cash/Bank Account $50,000

```

2. **At the end of the first year on 31.12.2016 for depreciation:**

```

Dec 31, 2016:

Depreciation Expense $4,000

Accumulated Depreciation Account $4,000

```

3. **At the end of the second year on 31.12.2017 for depreciation:**

```

Dec 31, 2017:

Depreciation Expense $4,000

Accumulated Depreciation Account $4,000

```

These journal entries reflect the purchase of the asset, and then the yearly depreciation expenses and their accumulation in the Accumulated Depreciation account.