Answer:
10.79% and 8.53 years
Explanation:
For computing the composite depreciation rate and the composite life of Vaughn’s assets, first we have to find out the depreciation expense which is shown below:
The formula is
= (Original cost - salvage value) ÷ (estimated useful life)
For A
= ($70,000 - $7,000) ÷ (10 years)
= ($63,000) ÷ (10 years)
= $6,300
For B
= ($50,000 - $5,000) ÷ (5 years)
= ($45,000) ÷ (5 years)
= $9,000
For C
= ($82,000 - $4,000) ÷ (12 years)
= ($78,000) ÷ (12 years)
= $6,500
We know that
Composite depreciation rate equals to
= Total annual depreciation ÷ Total asset value
where,
Total annual depreciation = $6,300 + $9,000 + $6,500
= $21,800
And, the total asset value = $70,000 + $50,000 + $82,000
= $202,000
So, the composite depreciation rate would be
= $21,800 ÷ $202,000
= 10.79%
And, the composite life of Vaughn’s assets would be
= Total depreciable amount ÷ Total annual depreciation
where,
Total depreciable amount = $63,000 + $45,000 + $78,000
= $186,000
So the composite life is
= $186,000 ÷ $21,800
= 8.53 years
