Molly Miller acquired a milling machine for $10 000 on 31 December 2014. Calculate depreciation for the year ended 31 December 2016 using the diminishing-balance method at 15% p.a. Assume a nil residual value.

Question

Quizplus · Accepted Answer

The diminishing balance method calculates depreciation by applying a constant rate to the asset's diminishing book value each year. For the first year (2015), the depreciation is 15% of $10,000, which is $1,500. This reduces the book value to $8,500. For the second year (2016), the depreciation is 15% of $8,500, which is $1,275.

Molly Miller Acquired a Milling Machine for $10 000 on 31