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

Business finance, Approaches to short-term financing problem?

Approaches to short-term financing problem?

What is corporate social responsibility, QUESTION Corporate Social Resp...

QUESTION Corporate Social Responsibility (CSR) is generally used to describe business's efforts to achieve sustainable outcomes by committing to good business practices and sta

Organisatinal management, the angency refers to which of the following

the angency refers to which of the following

Decesion making, assignment

assignment

Discuss the characteristics of an effective team, QUESTION 1 Write shor...

QUESTION 1 Write short notes on the following- (a) Non-verbal communication (b) Information overload (c) Identify the four categories of cultural differences that need

What is breaking time barriers, Q. What is Breaking Time Barriers? Comp...

Q. What is Breaking Time Barriers? Computers as well as telecommunication networks break time barriers. The major capabilities of IT are to shorten the barriers. The major capa

Intermediaries, the negavtive effect intermediaries has on a business organ...

the negavtive effect intermediaries has on a business organisation

Explain the stages of the team development process, QUESTION 1 Elaborat...

QUESTION 1 Elaborate on the communication skills that you believe employees should possess in order to ensure that customers are satisfied with the services provided by organis

Opportunities and constraints of private welfare institution, Question 1: ...

Question 1: (a) Using relevant examples distinguish clearly between public and private welfare institutions stressing the basic difference in their overall administration.

Procedure for planned maintenance, maintenance procedure is to prepare the...

maintenance procedure is to prepare the facility register. The facility defines what is to be maintained. It gives the complete details of all the items and facilities whic

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages