E T B Best PGDM Institute in Delhi PGDM Course in Delhi MBA AGU Best PGDM College in Delhi NCR Best MBA Colleges in Bangalore Best School in Noida Top Boarding School in Noida Top Boarding School in Delhi

Reducing Balance Method of charging depreciation.

A machine was bought for K10,000.00 and has an estimated economic life of four years and by that time it would likely worth 256.00 as a written down (salvage,scrap or residual).At the end of the fourth year the machine was sold for K5,000.00.Using the Reducing Balance method set up the following: i: Disposal(gain or loss)account ii: Profit and loss account ii: Machinery account ii: Balance sheet.

asked Feb 25, 2016 in Depreciation, Provisions and Reserves. by toemanil (14 points) 575 views

1 Answer

0 votes

Given below is the formula for calculating depreciation in this method.

            R = 1 – (S/C)1/n X 100

Where R = Rate of Depreciation (in %),

n = Useful life of the asset (in years)

S = Scrap value at the end of useful life of the asset

C= Cost of the asset

R = 1 – (256/10000)1/4 X 100

R = (1 - .4) x 100 = 60%

answered Feb 27, 2016 by jbsclasses (3,971 points)
Thankyou for answering this question for me. But I think you have answered on the machinery account.What about the Profit and loss account and the Balance sheet?

Each year in the Balance Sheet Machinery A/c will be shown on the Asset side at its book value as shown below.