Calculation of Annual Depreciation

To calculate the annual depreciation of the machine, we will use the straight-line method. The formula for calculating the annual depreciation is:

Annual Depreciation = (Cost of Asset – Scrap Value) / Useful Life

Substituting the given values, we get:

Annual Depreciation = (10,000 – Scrap Value) / 10
Annual Depreciation = 1,000 – (0.1 x Scrap Value)

Calculation of Scrap Value

To calculate the scrap value of the machine at the end of its useful life, we need to use the following formula:

Scrap Value = Cost of Asset – (Annual Depreciation x Number of Years of Useful Life)

Substituting the given values, we get:

Scrap Value = 10,000 – (1,000 x 10)
Scrap Value = 0

Explanation

The scrap value of an asset is the estimated amount that can be obtained by selling the asset at the end of its useful life. In this case, the machine has a useful life of 10 years and a cost of 10,000. The rate of depreciation is 10% per annum, which means that the asset will lose 10% of its value each year.

Using the straight-line method, we can calculate the annual depreciation, which is the same amount each year. Using this value, we can calculate the scrap value of the machine at the end of its useful life. In this case, the scrap value is zero, which means that the machine has no resale value at the end of its useful life.

This result is not uncommon, especially for assets that have a long useful life and are subject to high levels of depreciation. However, it is important to note that the scrap value is only an estimate and may vary depending on market conditions, demand, and other factors.