# Mastering WDV Asset Depreciation

Mastering WDV Asset Depreciation

Understanding Written Down Value Method Year 10 Business Studies New Zealand Curriculum

What is Asset Depreciation?

Assets lose value over time due to wear and use Businesses must account for this decrease in value Important for accurate financial reporting Helps businesses plan for asset replacement Required by accounting standards in New Zealand

Written Down Value (WDV) Method

Applies a fixed percentage rate to current asset value Rate is applied to the remaining value, not original cost Results in higher depreciation in early years Common method used by New Zealand businesses Also known as 'Reducing Balance Method'

WDV Depreciation Formula

Worked Example: 3-Year Calculation

Asset Cost: $1,000 Depreciation Rate: 20% per year Year 1: $1,000 × 20% = $200 depreciation WDV end Year 1: $1,000 - $200 = $800 Year 2: $800 × 20% = $160 depreciation WDV end Year 2: $800 - $160 = $640 Year 3: $640 × 20% = $128 depreciation WDV end Year 3: $640 - $128 = $512

Rounding and Estimation Tips

Always round to the nearest dollar for final answers Use estimation to check if answers are reasonable 20% of $1,000 should be close to $200 Mental math: 10% = $100, so 20% = $200 If your answer seems too high or low, double-check Show all working clearly in business calculations

Practice Problems

Problem 1: Vehicle costing $3,000, 25% rate, calculate 3 years Problem 2: Computer costing $5,000, 15% rate, calculate 4 years Problem 3: Furniture costing $750, 10% rate, calculate 5 years Work in pairs and show all calculations Check your answers using estimation Be ready to explain your working

Discussion Questions

Why do businesses need to calculate depreciation? How does WDV method reflect real-world asset value loss? What advantages does WDV have over other methods? When might a business choose a higher depreciation rate?

Key Learning Summary

WDV applies depreciation rate to current asset value Depreciation amounts decrease each year Formula: Depreciation = Current WDV × Rate New WDV = Current WDV - Depreciation Always round final answers to nearest dollar Use estimation to check reasonableness Important for business financial planning

Quick Assessment Check

What does WDV stand for? If an asset costs $2,000 with 30% depreciation rate, what's Year 1 depreciation? Why does depreciation amount decrease each year in WDV method? Name one reason businesses calculate depreciation What should you do if your calculated answer seems unreasonable?