A machine cost N12,000 and has a useful life of 4 years and an expected disposal value of N400.Using the reducing balance method what will be the depreciati...

Answer Details

The reducing balance method is a depreciation method that applies a fixed percentage rate to the remaining net book value of an asset each year. To calculate the depreciation charge for year 2 at 20% using the reducing balance method, we first need to determine the net book value of the asset at the beginning of year 2. In year 1, the depreciation charge is calculated as 20% of the initial cost of the machine, which is N12,000. Therefore, the depreciation charge for year 1 is N2,400, and the net book value of the machine at the beginning of year 2 is N9,600 (i.e., N12,000 - N2,400). To calculate the depreciation charge for year 2, we apply the same depreciation rate of 20% to the net book value at the beginning of the year. Therefore, the depreciation charge for year 2 is 20% of N9,600, which is N1,920. So the answer is N1,920. In summary, the depreciation charge for year 2 using the reducing balance method at 20% for a machine that costs N12,000, has a useful life of 4 years, and has an expected disposal value of N400 is N1,920.