Question

QUICK ONE!

A truck costing $80,000 has an expected life of 8 years

Required:

c) Prepare a depreciation schedule using the reducing balance method? (assuming the rate is 1.5 times the straight-line rate)

Answer 1

Rate is 1.5 times the straight line depreciation rate which is;

=
`(80,000)/(8)`

= $10,000 per year

Rate =
`(10,000)/(80,000)` * 100%

=12.5%

Reducing balance rate = 12.5% * 1.5

= 18.75%

The Depreciation Schedule would be;

Year Beginning Book Value Depreciation Expense Accumulated Depreciation Book Value

1 $80,000 80,000*18.75% = $15,000 $15,000 $65,000

2 $65,000 65,000 * 18.75% = $12,1875.50 $27,187.50 $52,812.50

3 $52,812.50 52,812.5 *18.75% = $9,902.34 $37,187.84 $42,910.16

4 $42,910.16 42,910.16 * 18.75% = $8,045.66 $45,233.50 $34,766.50

5 $34,766.50 34,766.50 * 0.1875 = 6,518.72 $51,752.22 $28,247.78

6 $28,247.78 28,247.78 * 0.1875= $5,296.45 $57,048.67 $22,951.33

7 $22,951.33 22,951.33 * 0.1875= 4,403.37 $61,452.04 $18,547.96

8 $18,547.96 18,547.96 * 0.1875 = $3,477.74 $80,000 $0

$3,477.74 + 15,070.22= $18,574.96

Depreciation for the last year was not sufficient to take the truck to $0 so the remainder will be depreciated in that year so that it may be completely depreciated.