Hello to all,
i have a query abtfinding out the rate of depreciation..
rate of depreciation=1-(2.5/10)^1/10
Ans. is coming to 12.95%BUt its getting really difficult to solve above equation with d use of logarithm...If anyone can solve it using log technique..as scientific calc is not allowed in CA exam..
THIs case is taken form CA FINal study material-new course(chap-valuation of tangible fixed assets...pn.9.15)
waiting eagerly for reply..
REgards,
Manasvi
| Steps to find Depreciation rates under WDV method, with the given |
| depreciation rate under SLM and life of the asset. |
| (i) Take Depreciation Rate under SLM |
| (ii) Multiply with life of asset |
| (iii) Divide by 100 |
| (iv) Deduct from 1 |
| (v) Find the root of step (iv) to the power of step (ii). (Here the power is the given life of asset) |
| (vi) Deduct the above found result from 1 |
| (vii) Multiply the above with 100 |
| (viii) The result is the Depreciation Rate under WDV Method. |
| Example - Cost = 10 L |
| - RV = 2.5 L |
| - Life = 10 Y |
| Steps = |
| SLM Rate is (10-2.5)/10*100 = 7.5% |
| 7.5*10 = 75 |
| 75/100 = .75 |
| 1-.75 = .25 |
| root of .25 to the power of 10 (life) = .87055 |
| 1-.87055 = .12945 |
| .12945*100 = 12.945% (WDV Rate) |
| Every subsequent yr.'s depreciation will be (100-12.945)% of the preceeding year's depreciation. In this ex. 2nd yr. depn. is 112693 and 1st yr. depn. is 129450. (i.e) 112693/129450*100 = 87.055 which is nothing but (100-WDV rate). Reducing portion is WDV rate between intermediate depreciations. |
No, it's not possible to find root of 0.25 to the power of 10 by using normal calculator. i have tried it on my own before posting this reply. Better you obtain help of how to find the solution using log from any science student. I hope the reply would have given you some idea about the relationship between SLM & WDV method.
CAclubindia
