taken from the
A fixed percentage of the book value is used to calculate the
depreciation, which must be written off each year. If the life span of an asset
is for instance, 5 years, and is normally calculated as 20% the percentage needs
to be doubled to 40% in this case. The fixed percentage must be used to
calculate the percentage on the reduced or diminished balance at the beginning
of the applicable year. The following worksheet is used to calculate the
depreciation on a delivery van:
The depreciation is calculated on the full cost price. The trade in value or scrap value at the end of the life span of the delivery van is not taken into account for calculating depreciation according to this method. This method will always have a minimal book value at the end of the last year in the life span of the fixed asset, which is the scrap value.
For the first year, we will calculate depreciation on the cost price of R(£) 15 500 including the trade in or scrap value of R(£) 500. The depreciation will be calculated as 40% of R(£) 15 500 which is R(£) 6 200 per annum. For the next year, the depreciation will be calculated as 40% on the reduced balance, which is the book value of R(£) 9 300. The depreciation will be calculated as 40% on the book value for each of the successive years for the life span of the delivery van. After the end of the 5th year, the book value will be R(£) 1 205, which is more than the trade in or scrap value of the vehicle. Over the life span of the vehicle, the depreciation will total to R(£) 14 295.
The depreciation is calculated on the full cost price. The trade in value or scrap value at the end of the life span of the delivery van is not taken into account for calculating depreciation according to this method. This method will always have a minimal book value at the end of the last year in the life span of the fixed asset, which is the scrap value.
For the first year, we will calculate depreciation on the cost price of R(£) 15 500 including the trade in or scrap value of R(£) 500. The depreciation will be calculated as 40% of R(£) 15 500 which is R(£) 6 200 per annum. For the next year, the depreciation will be calculated as 40% on the reduced balance, which is the book value of R(£) 9 300. The depreciation will be calculated as 40% on the book value for each of the successive years for the life span of the delivery van. After the end of the 5th year, the book value will be R(£) 1 205, which is more than the trade in or scrap value of the vehicle. Over the life span of the vehicle, the depreciation will total to R(£) 14 295.
