- GDD are considering investing in a new manufacturing machine.The machine would cost £325,000 and have a useful life of 10 years.The residual value at the end of the 10 years would be £50,000.Calculate the accounting value of the machine for each year of itsuseful life, using both the straight-line and reducing-balancemethods of depreciation. Use a depreciation rate of 15% for thereducing balance method.
Year | Straight-Line Methodvalue | Reducing-Balance Methodvalue |
0 | £325,000 | £325,000 |
1 | | |
2 | | |
3 | | |
4 | | |
5 | | |
6 | | |
7 | | |
8 | | |
9 | | |
10 | | |
There are 20 marks available forthis question, one for each calculation. If an early error causesotherwise correctly calculated later answers to be wrong, only theoriginal error reduces the marks.
- Which depreciation method would you choose for themanufacturing machine and why? Compare the methods and give atleast two reasons for your choice.
There are 5 marks available for this question: 1 for yourchoice, 4 for the comparison and justifications.
