A firm buys three types of equipment A,B and C on January 1, 1991. The purchase price and depreciation provided is as follows: Depreciation Rates on Reducing Balance Method Price Equipment A 5000 5% Equipment B 2000 10% Equipment C 1000 20% Calculate the average rate of depreciation for the years 1991 and 1992. Why do the 2 two rates differ? (Use geometric mean in calculating average rate.

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A firm buys three types of equipment A,B and C on January 1, 1991. The purchase price and
depreciation provided is as follows:
Depreciation Rates on
Reducing Balance
Method
Price
Equipment A
5000
5%
Equipment B
2000
10%
Equipment C
1000
20%
Calculate the average rate of depreciation for the years 1991 and 1992. Why do the 2 two rates differ?
(Use geometric mean in calculating average rate.
Transcribed Image Text:A firm buys three types of equipment A,B and C on January 1, 1991. The purchase price and depreciation provided is as follows: Depreciation Rates on Reducing Balance Method Price Equipment A 5000 5% Equipment B 2000 10% Equipment C 1000 20% Calculate the average rate of depreciation for the years 1991 and 1992. Why do the 2 two rates differ? (Use geometric mean in calculating average rate.
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