On 31 December 2013,a new machine with a useful life of 6 years and an estimated residual value of zero was purchased by a business at a cost of $30,000.The amount of depreciation expense charged for the year ended 31 December 2015,using the reducing-balance method at a rate of 30% per annum,is:
A) $6,300.
B) $5,000.
C) $9,000.
D) $1,800.

Question

Quizplus · Accepted Answer

The reducing balance method calculates depreciation by applying a constant rate to the asset's diminishing book value each year. For the first year (2014), the depreciation is 30% of $30,000, which is $9,000. This leaves a book value of $21,000. For the second year (2015), the depreciation is 30% of $21,000, which is $6,300.

On 31 December 2013,a New Machine with a Useful Life