How is reducing-balance depreciation calculated? (Section 8.7 .3) Data from section 8.7.3 Those who believe that the

How is reducing-balance depreciation calculated? (Section 8.7 .3)

Data from section 8.7.3

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Those who believe that the asset depreciates most in earlier years would calculate the depreciation using the formula: Fixed percentage x Net book value at the start of the year Take the example of the asset costing 1,000. The fixed percentage applied for the reducing-balance method might be as high as 50%. The calculations would be as shown in the table in Table 8.2. You will see from the table in Table 8.2 that under the reducing-balance method there is always a small balance remaining. In this example, the rate of 50% is used to bring the net book value to a relatively small amount. The formula for calculating the exact rate requires a knowledge of compound interest and may be found at the end of