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GDD are considering investing in a new manufacturing machine. The machine would cost £325,000 and have...

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Accounting

  1. GDD are considering investing in a new manufacturing machine.The machine would cost £325,000 and have a useful life of 10 years.The residual value at the end of the 10 years would be £50,000.Calculate the accounting value of the machine for each year of itsuseful life, using both the straight-line and reducing-balancemethods of depreciation. Use a depreciation rate of 15% for thereducing balance method.

Year

Straight-Line Methodvalue

Reducing-Balance Methodvalue

0

£325,000

£325,000

1

2

3

4

5

6

7

8

9

10

There are 20 marks available forthis question, one for each calculation. If an early error causesotherwise correctly calculated later answers to be wrong, only theoriginal error reduces the marks.

  1. Which depreciation method would you choose for themanufacturing machine and why? Compare the methods and give atleast two reasons for your choice.

There are 5 marks available for this question: 1 for yourchoice, 4 for the comparison and justifications.

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