Creep Ltd purchased a machine for $100 000 on 1 January 2016.It has an estimated useful life of five years.Creep Ltd's financial period ends on 31 December.The machine was depreciated using the reducing balance method at 60 per cent.
-What was the balance of accumulated depreciation at 31 December 2018?

Question

Quizplus · Accepted Answer

Using the reducing balance method at 60%, the depreciation for each year is calculated on the book value at the beginning of the year. 1st year depreciation: $100,000 * 60% = $60,000Book value at end of 1st year: $100,000 - $60,000 = $40,0002nd year depreciation: $40,000 * 60% = $24,000Book value at end of 2nd year: $40,000 - $24,000 = $16,0003rd year depreciation: $16,000 * 60% = $9,600Book value at end of 3rd year: $16,000 - $9,600 = $6,400Accumulated depreciation at 31 December 2018 (after 3 years): $60,000 + $24,000 + $9,600 = $93,600

Creep Ltd Purchased a Machine for $100 000 on 1