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Post Info TOPIC: Working out a depreciation percentage (reducing balance)


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Working out a depreciation percentage (reducing balance)
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My guess would be 17%.

12000 - 4000 = 8000/4 = 2000

12000/2000 = 6

100/6 = 16.66 so 17%

(I dont actually know and may have mis-interpreted your question so dont take it too seriously please smile)

 

Or after re-reading it could also be 25%, also see disclaimer above in brackets.

 

In fact after re-reading further I've just noticed the reducing balance bit so forget all the above biggrin



-- Edited by Rhianrach on Thursday 10th of January 2013 05:34:24 PM



-- Edited by Rhianrach on Thursday 10th of January 2013 05:35:44 PM

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Steve


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Ok its r = 1 - n (tick dealy) s/c

r = percentage rate of depreciation
n = number of years
s = salvage (residual) value
c = cost of asset

r = 1 - 4 (tick thing) 4000/12000

r = 1 - 4 (tick wotsit) 0.333333333

r = 1 - 0.76 (which is 0.333333333 then square root button twice)

r = 0.24 or 24%



-- Edited by Rhianrach on Thursday 10th of January 2013 06:07:18 PM

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Steve


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Hi all. I have been given the following information and need to work out the percentage that has been applied for depreciation using the reducing balance method.

Original cost of vehicle: £12,000
Estimated lifespan: 4 years
Estimated resell value: £4,000

What percentage to the nearest whole number will be used each year?

I found this formula but, it being nearly 30 years since I took O-Level Maths, don't understand the last bit no

Rate = 1 - (Scrap / Cost of Machine)1/Years

Many thanks



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Thanks for having a go, Rhianrach. The correct answer is actually 24% but I've no idea how to arrive at that figure. David Cox's Business Accounts gives a formula that uses something called a "fourth root". The fact that I had to google this term speaks volumes about my maths capabilities. I'm sure I knew this at one time ... many years ago.

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Hehe I was good at maths at school, but we're talking twenty odd years ago now so I'm in the same boat as you. The thing is I'm half certain that this is explained as part of the AAT, I shall go and have a look whilst my kids are out buying even more Build a Bear things.

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Steve


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or 1-(4000/12000)^(1/4) = 0.240164 * 100 = 24%

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Shaun

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I think that's the original equation. What does the ^ mean?

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Steve


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Thanks both. The ^ symbol means "raised to the power of" and the tick thingy means root as in square root. Can't quite figure out how I do the calculations using a normal calculator though. I found a website called "Maths is Fun" (definitely not my recollection) which explains it, just not in simple enough terms for this dumpling:

http://www.mathsisfun.com/algebra/exponent-fractional.html

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Maths is fun is an oxymoron by my reckoning, unless you're a complete dork biggrin. I knew the square root symbol, and now you mention the power off symbol it all comes flooding back. I don't think you will ever do it on a normal calculater in one hit to be fair, or maybe that's just my 99p asda job that fails so enormously.



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Steve


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try a Casio fx-85ES (both Tesco and Sainsbury's stock them).

personally I hate it but it's great for things like this (my favorites are the Xerox XRX-250 and staples 550).

I only bought the Casio becuse the learning curve formulae uses logarithms which really does make it impossible on any of my desktops.

I keep finding myself on that Maths is fun website when helping my son with my son with his homework.... Give me a complex accounting problem over trying to get my head around the simplest shapes anyday!



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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.



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There's always cheating...try this for size http://www.calculatoredge.com/finance/dreducing.htm

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