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

What do you mean by dependent in workmen compensation act, What do you mean...

What do you mean by dependent in the workmen compensation act 1923s? Dependent implies that there is as: • A widow, unmarried daughter, a minor son or a widowed mother and

Decision making and leadership, Question 1 Herring (1994: introduction)...

Question 1 Herring (1994: introduction) claims that "men and women have recognizably different styles in posting to the Internet". Discuss. Question 2 (a) Often women

Loans & compound interest, E-Loan, an online lending service, recently offe...

E-Loan, an online lending service, recently offered 36-month auto loans at 4.2% compounded monthly. If you can afford monthly payments of $411.)) how much can you borrow? And I nee

Benefits, inportant banafits of business communission

inportant banafits of business communission

What do you understand by organizational conflict, Question 1: (i) Exp...

Question 1: (i) Explain the "process of motivation", that is, how motivation works. (ii) With reference to three theories of motivation, explain how they are relevant for

BSHS 382 Version 3 Research and Statistics for the S, What are the basic pr...

What are the basic principles for humane treatment of human subjects in research?

Different types of change that an organization may face, QUESTION (a) O...

QUESTION (a) Organisations are systems that exist in the context of an external environment, an interdependent relationship, interact with it in order to survive and grow. Any

Fundamental budgets essential for manufacturing budget, What fundamental bu...

What fundamental budgets are essential for manufacturing budget? Manufacturing budget requires the given fundamental budgets or estimates to meet the plans as follows: 1. Pr

Global economic crises, Global Economic Crises Th...

Global Economic Crises The current economic crisis has affected many countries in Europe as well as many countries in the world over. Micro credit institu

What are the characteristics of a small group, QUESTION 1 i) Explain th...

QUESTION 1 i) Explain the following definitions Technical definition Process definition Transactional definition ii) What are the characteristics of a small g

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages