The Concept of Depreciation: Understanding the Value of Assets Over Time

Depreciation is a method used to allocate the cost of a tangible asset over its useful life. It reflects the decrease in value of the asset as it ages or becomes outdated. In the case of the jet ski that depreciates at 11% of its original value each year, the value of the jet ski decreases by 11% annually.

To calculate the depreciated value of the jet ski after 5 years, we need to compound the depreciation rate each year. Starting with the original value of $8000:

Calculating Depreciation:

Year 1: Depreciation = (1 - 11%) x $8000 = $7,120

Year 2: Depreciation = (1 - 11%) x $7,120 = $6,336.80

Year 3: Depreciation = (1 - 11%) x $6,336.80 = $5,639.75

Year 4: Depreciation = (1 - 11%) x $5,639.75 = $5,019.38

Year 5: Depreciation = (1 - 11%) x $5,019.38 = $4,467.25

Therefore, the value of the jet ski after 5 years would be $4,467.25.