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    Rate of Depreciation in Case of WDV (1-nth Root of Residual Value) /cost (Cost-Sv) /life

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    AnishaSapra
    This document contains schedules for depreciation of an asset using the written down value (WDV) and straight line method (SLM). Under the WDV method, the annual depreciation and written down value decreases each year. Using the SLM, the annual depreciation amount remains the same each year. Changing the depreciation method from WDV to SLM increases current year profits due to a lower depreciation amount under SLM. It also increases past year profits through a retrospective adjustment increasing net income.

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    Rate of Depreciation in Case of WDV (1-nth Root of Residual Value) /cost (Cost-Sv) /life

    Uploaded by

    AnishaSapra
    70 views3 pages
    This document contains schedules for depreciation of an asset using the written down value (WDV) and straight line method (SLM). Under the WDV method, the annual depreciation and written down value decreases each year. Using the SLM, the annual depreciation amount remains the same each year. Changing the depreciation method from WDV to SLM increases current year profits due to a lower depreciation amount under SLM. It also increases past year profits through a retrospective adjustment increasing net income.

    Original Description:

    Depreciation Exercise

    Original Title

    Depreciation Exercise

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    This document contains schedules for depreciation of an asset using the written down value (WDV) and straight line method (SLM). Under the WDV method, the annual depreciation and written down value decreases each year. Using the SLM, the annual depreciation amount remains the same each year. Changing the depreciation method from WDV to SLM increases current year profits due to a lower depreciation amount under SLM. It also increases past year profits through a retrospective adjustment increasing net income.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    70 views3 pages

    Rate of Depreciation in Case of WDV (1-nth Root of Residual Value) /cost (Cost-Sv) /life

    Uploaded by

    AnishaSapra
    This document contains schedules for depreciation of an asset using the written down value (WDV) and straight line method (SLM). Under the WDV method, the annual depreciation and written down value decreases each year. Using the SLM, the annual depreciation amount remains the same each year. Changing the depreciation method from WDV to SLM increases current year profits due to a lower depreciation amount under SLM. It also increases past year profits through a retrospective adjustment increasing net income.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    You are on page 1of 3

    Bengal A

    Cost 300
    Scrap Value 15
    Life (yrs) 10
    WDV Rate 0.2588656
    Rate of Depreciation in case of WDV (1-nth root of residual value)/cost
    Straight line Yearly Depreciation 28.5
    (cost- sv)/life

    (A) Schedule of Dept. as per WDV Method

    Year Cost Yearly Dep. Acc. Dep. WDV(BV)

    2006-07 300 77.6596653 77.659665 222.34033


    2007-08 300 57.5562532 135.2159 164.78408
    2008-09 300 42.656922 177.87284 122.12716

    (B) Schedule of Dep. As per SL Method


    Year Cost Yearly Dep. Acc. Dep. WDV(BV)
    2006-07 300 28.5 28.5 271.5
    2007-08 300 28.5 57 243
    2008-09 300 28.5 85.5 214.5

    Amount of dep reduces due to change in method, amount of profit increases

    Cost 700000
    Life 25 End of 3rd year
    RV 100000 Cost 700000
    Mthod SL Acc. Dep. 72000
    Yearly Dep SLM 24000 WDV(BV) 628000

    Revised Yrly Dep., if the life estimates are revised


    Cost 628000
    Life 30
    RV 100000
    Revised Yrly Dep. 17600

    Net effect of revising 6400


    (Future profits will inc by)
    Effect of change in Method of Dep on Net Income
    (A) If change in method is treated as policy change= Retrospective effect
    will have changes in 2 levels:
    1. Change in current years profit (diff. in yearly dep. Amount) 14.156922035
    (This will not have explicit effect on Fin. Stmt.)
    2. Effect on previous years profit 78.215918504
    (explicitly seen in PL above the line as addition to profit)

    NET EFFECT OF CHANGE IN METHOD OF DEP 92.372840539

    Bengal
    Year Aluminum Adjusted Adjusted
    ended
    March Profit
    31 Sales after
    Tax NP RATIO Growth in sales PAT NP RATIO
    2006 1215 129 0.1062
    2007 1324 138 0.1042 0.09
    2008 1589 163 0.1026 0.2
    2009 2066 257 0.1244 0.3 192.33901 0.0931
    (net profit ratio has actually b
    from 10.2 to 9.31)
    (B) If change in method is treated as estimate change= Prospective effect

    Cost (at the beg. Of 2008-09) 164.784081496


    Life 8 Have used asset for 2 years
    RV 15 will remain same
    Revised Dep as per SLM(applicable 2008-09 18.723010187

    mates are revised


    t profit ratio has actually been worsened
    m 10.2 to 9.31)

    et for 2 years

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