Reducing balance method and straight line method, Business Management

Assignment Help:

Satine Enterprise Ltd.

a) Reducing balance method:

Year	Depreciation	Net Book Value
0	0	$25,000
1	$8,750 ($25,000 x 35%)	$16,250
2	$5688 ($16,250 x 35%)	$10,563

b) Straight line method: Annualised depreciation = ($25,000 - $2,900) / 5 years = $4,420

Year	Depreciation	Net Book Value
0	0	$25,000
1	4420	$20,580
2	4420	$16,160

Therefore, total depreciation = $8,840

c) Students should show their working out (which could include answers taken from Questions 3.5.6a and 3.5.6b.

Method	Net Book Value
Reducing balance	$6,865
Straight line	$11,740

d) Reducing Balance

Straight line

More realistic method for depreciating motor vehicles (these tend to lose most of their value at the beginning of their useful life)

More complicated to calculate

Subjective nature of the (arbitrary) chosen rate of depreciation

Easier to calculate

Simple to understand

Residual value of the asset is often a guess (at best) and may not be realized in the future.

Hence, the reducing balance method depreciates the NBV of the car by a greater amount in this time period

Related Discussions:- Reducing balance method and straight line method

Bma, 5 steps in the process of evaluating the purchasing and suppy

5 steps in the process of evaluating the purchasing and suppy

..greening an organisation, greening an organisation and the effects that m...

greening an organisation and the effects that might affect greening an organisation

Productions and manufacturing budget based factors, Which factors are the p...

Which factors are the productions and manufacturing budget based? The productions and manufacturing budget based is based onto: 1. Sales budget, 2. Factory capacity (Prod

Describe the four stages of the creative process, 1). Explain the meaning o...

1). Explain the meaning of Goal Setting and how it can increase the employee performance? 2). The head of operations at Nano Tech Systems announced that the company "empowers i

Outline four common types of communication barriers, QUESTION 1 (a) Lis...

QUESTION 1 (a) List four characteristics of effective "Business Messages." Explain briefly each characteristic with examples (b) Comment on the five benefits of effective co

Business in post american world, do you believe that adaptive unconscious c...

do you believe that adaptive unconscious creates false memories?

Operations management, benefits

benefits

Explain a maslows theory of motivation, "No organisation can succeed witho...

"No organisation can succeed without a certain level of commitment and effort from its members. For that reason .... cholars have always formed theories about Motivation." (a)

Define the term quality, Quality Management Principle 1. Define the ter...

Quality Management Principle 1. Define the term Quality. 2. What is the objective of Reliability? Discuss various issues involved in ensuring Reliability. 3. What are the

Substitution effects to analysis remuneration, Firms are concerned about th...

Firms are concerned about the cost of absenteeism (employees either arriving late to work or leaving early from work). When firms tell employees that their pay will be deducted for

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages