1 Answers

To calculate the depreciation for each year using the reducing balance method with a depreciation rate of 50%, we’ll apply the following steps:

- Calculate the depreciation amount for the first year: Depreciation for Year 1 = Initial Cost * Depreciation Rate Depreciation for Year 1 = $12,800 * 0.5 = $6,400
- Calculate the Net Book Value (NBV) after the first year: NBV after Year 1 = Initial Cost – Depreciation for Year 1 NBV after Year 1 = $12,800 – $6,400 = $6,400
- Repeat the process for subsequent years, using the NBV from the previous year: Year 2: Depreciation for Year 2 = NBV after Year 1 * Depreciation Rate Depreciation for Year 2 = $6,400 * 0.5 = $3,200 NBV after Year 2 = NBV after Year 1 – Depreciation for Year 2 NBV after Year 2 = $6,400 – $3,200 = $3,200

Year 3: Depreciation for Year 3 = NBV after Year 2 * Depreciation Rate Depreciation for Year 3 = $3,200 * 0.5 = $1,600 NBV after Year 3 = NBV after Year 2 – Depreciation for Year 3 NBV after Year 3 = $3,200 – $1,600 = $1,600

Year 4: Depreciation for Year 4 = NBV after Year 3 * Depreciation Rate Depreciation for Year 4 = $1,600 * 0.5 = $800 NBV after Year 4 = NBV after Year 3 – Depreciation for Year 4 NBV after Year 4 = $1,600 – $800 = $800

Year 5: Depreciation for Year 5 = NBV after Year 4 * Depreciation Rate Depreciation for Year 5 = $800 * 0.5 = $400 NBV after Year 5 = NBV after Year 4 – Depreciation for Year 5 NBV after Year 5 = $800 – $400 = $400

The machine is then sold at a scrap value of $400.

Therefore, the annual depreciation amounts for each year using the reducing balance method with a depreciation rate of 50% are as follows: Year 1: $6,400 Year 2: $3,200 Year 3: $1,600 Year 4: $800 Year 5: $400

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