Calculation of Depreciation Rate

To determine the rate of depreciation, we need to use the diminishing balance method formula:

Depreciation Rate = 1 - ((Salvage Value / Cost of Asset)^(1/Useful Life))

Where,
Salvage Value = Value of asset at the end of useful life
Cost of Asset = Original cost of asset
Useful Life = Number of years the asset will be used

Given:
Useful life = 4 years
Value at end of 4 years = 24% of original cost

Therefore, salvage value = 24% of original cost

Substituting the values in the formula:

Depreciation Rate = 1 - ((0.24)^(1/4))

Depreciation Rate = 1 - (0.567)

Depreciation Rate = 0.433 or 43.3%

Explanation

Depreciation is a method of allocating the cost of a tangible asset over its useful life. The diminishing balance method is a popular depreciation method that results in higher depreciation expense in the early years of an asset's life and lower depreciation expense in the later years.

In this question, we are given that the asset has a useful life of 4 years and is depreciated by the diminishing balance method. We are also given that the asset's value at the end of 4 years is 24% of the original cost.

Using the formula for the diminishing balance method, we can calculate the rate of depreciation. This rate of depreciation represents the percentage of the asset's value that is expensed each year.

In this case, the rate of depreciation is 43.3%. This means that each year, 43.3% of the asset's value will be expensed until the end of the asset's useful life.

Overall, by using the diminishing balance method, the asset will be expensed at a higher rate in the earlier years of its useful life, which reflects the fact that assets often lose value more quickly in the beginning of their lifespan.