An asset costs $80 000 and has a residual value of $7 000. It has a four- year life. Using reducing- balance depreciation, Year 1 depreciation would be:

Question

Quizplus · Accepted Answer

The reducing-balance method calculates depreciation by applying a fixed percentage to the book value of the asset each year. The formula is: Depreciation = (Cost - Residual Value) * (1 - (Residual Value/Cost)^(1/Life)). For Year 1, this results in a depreciation of $36,490.

An Asset Costs $80 000 and Has a Residual Value