Methods of Calculating Depreciation

Straight line method

Cost of asset x % of depreciation per annum 

Example:

On 1 January 2014 Jane purchased a laptop at $6000 and paid by cheque. She estimated that 20% depreciation for each year. Calculate the annual depreciation charge for year 2013, 2014 & 2015 by using straight line method.

Depreciation for 2013 = $6000 x 20% = $1200

Depreciation for 2014 = $6000 x 20% = $1200

Depreciation for 2015 = $6000 x 20% = $1200

Reducing balance method

Net book value x % of depreciation per annum

*Net book value = Cost – Accumulated depreciation

Example:

On 1 January 2014 Jane purchased a laptop at $6000 and paid by cheque. She estimated that 20% depreciation for each year. Calculate the annual depreciation charge for year 2013, 2014 & 2015 by using reducing balance method.

Depreciation for 2013 = $6000 x 20% = $1200

Depreciation for 2014 = ($6000-$1200) x 20% = $960

Depreciation for 2015 = ($4800-$960) x 20% = $768

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