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Hello sir, hope you are fine.
Non-current asset has an expected life of ten years with a nil residual value. The asset is due to be depreciated using the straight-line method.
Which of the following statements is correct regarding the use of the reducing balance method instead?A) Depreciation will be higher in each year using 20% reducing balance.
B) Depreciation will be higher in each of years 1, 2 and 3 using 25% reducing balance.
C) Depreciation will be lower in each year using 15% reducing balance.
D) Depreciation will be lower in year 2 using 18% reducing balance.Sir, this question is not much tricky but very much time consuming. I am assuming a condition and then applying both depreciation methods.
Can you please suggest me quick and fast way for exam?No, you don’t need particularly detailed calculations. It is more logic and we are looking for one correct answer.
Assume cost = 1,000. Existing deposit is therefore 100pa
A Rubbish….1st year is 200
B Yr 1 250, Yr 2 750/4 187.5 Yr 3 (1000- 250 – 187.5)/4 = 140.6 TRUE
C Rubbish….ist Yr is 150
D No (1,000 – 180) x 18% = 148
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