Question

Cricket Limited has the following balances in its trial balance as at 31 December 2019 in...

Cricket Limited has the following balances in its trial balance as at 31 December 2019
in relation to machinery:
Dr Cr
€ €
Machinery Cost 354,000
Machinery accumulated depn 1.1.19 87,590
The company's policy is to depreciate machinery at a rate of 20% reducing
balance. What is the depreciation charge for the year rounded to the nearest
Euro?
Business   Accounting   
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Answer #1

The reducing balance method of depreciation results in declining depreciation expenses with each accounting period. In other words, more depreciation is charged at the beginning of an asset's lifetime and less is charged towards the end.

Accumulated Depreciation on 01.01.2019 = 87590
WDV Rate = 20%
WDV of Machine on 01.01.2019 = 354000-87590
= 266410
Depreciation Expense for 31.12.2019 = 266410 X 20%
= 53282
Accumulated Depreciation on 31.12.2019 = 87590+53282
= 140872
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