Question
In: Finance
Calculate depreciation (create schedule - excel is fine) of an asset costing $5,000,000, depreciating at a...
Calculate depreciation (create schedule - excel is fine) of an asset costing $5,000,000, depreciating at a rate of 10% per annum (diminishing value), having a life of 12 years and salvage value of $900,000 at the end of life.
Please show working out / formulas used.
Solutions
Expert Solution
| Calculation of Depreciation as per Diminishing Value Method | |||||
| Year | Value of Assest (A) | Rate of Dep. (B) | Amount of Dep (At the End of Year) | Closing Value of Assets | |
| ( C ) = (A) x (B) | (D) = (A) - ( C ) | ||||
| 1 | 50,00,000.00 | 10% | 5,00,000.00 | 45,00,000.00 | |
| (A) = Closing Value of Last Year | 2 | 45,00,000.00 | 10% | 4,50,000.00 | 40,50,000.00 |
| (A) = Closing Value of Last Year | 3 | 40,50,000.00 | 10% | 4,05,000.00 | 36,45,000.00 |
| (A) = Closing Value of Last Year | 4 | 36,45,000.00 | 10% | 3,64,500.00 | 32,80,500.00 |
| (A) = Closing Value of Last Year | 5 | 32,80,500.00 | 10% | 3,28,050.00 | 29,52,450.00 |
| (A) = Closing Value of Last Year | 6 | 29,52,450.00 | 10% | 2,95,245.00 | 26,57,205.00 |
| (A) = Closing Value of Last Year | 7 | 26,57,205.00 | 10% | 2,65,720.50 | 23,91,484.50 |
| (A) = Closing Value of Last Year | 8 | 23,91,484.50 | 10% | 2,39,148.45 | 21,52,336.05 |
| (A) = Closing Value of Last Year | 9 | 21,52,336.05 | 10% | 2,15,233.61 | 19,37,102.45 |
| (A) = Closing Value of Last Year | 10 | 19,37,102.45 | 10% | 1,93,710.24 | 17,43,392.20 |
| (A) = Closing Value of Last Year | 11 | 17,43,392.20 | 10% | 1,74,339.22 | 15,69,052.98 |
| (A) = Closing Value of Last Year | 12 | 15,69,052.98 | 10% | 1,56,905.30 | 14,12,147.68 |
| Salvage Value | 12 | 9,00,000.00 |
In diminishing value method, there is no use of salvage value while calculating depreciation.
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