Page 318 - Agriculture_Form_Three

Agriculture for Secondary Schools

The value of annual depreciation which is obtained by using this formula is then
deducted from the remaining value of the asset at the end of each year.
Example
Suppose the original value of an asset was TZS 20,000,000 and it can be sold off in
the next ten years for TZS 4,000,000. Calculate the annual depreciation of the asset
by using the straight-line method.
Solution

Step 1: State the formula
Original cost of the asset (C) Salvage value (S)
−
Annual depreciation =
Useful life in years
Step 2: Extract data from the questions

Original cost of the asset (C) = TZS 20,000,000
Salvage value (S) = TZS 4,000,000
Expected life of asset (N) = 10 years

Step 3: Apply the formula

TZS 20,000,000 TZS 4,000,000
−
Annual depreciation =
10 years
TZS 20,000,000 TZS 4,000,000
−
=
10 years

= TZS 1,600,000 per annum
Therefore, TZS 1,600,000 should be set aside every year for ten years.
Exercise 14.1
Answer the following questions:
1. (a) What does the terms ‘depreciation chargesʼ and ‘salvage valueʼ mean?
(b) Describe any three importance of estimating depreciation charges of farm
assets.
2. A plough which was bought for TZS 5,100,000 in January 2020 is expected to be

written off in December 2030 at an estimated value of TZS 637,500. Calculate
the annual depreciation of the plough using the straight-line method. What will
be the value of the plough at the end of 2026?
3. There is a dairy cattle house which is depreciating at TZS 430,000 per annum.
The house is expected to be demolished after being in use for 15 years. By that
time, its remains are expected to be sold for TZS 550,000. What is the original
value of the house?

Student’
Student’s Book Form Twos Book Form Three
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