Questions:
Kensho gave laptops to its new team members in Pakistan on August 1st 2023 at a cost of $10000 each. The average life of the laptop according to the company's policy is 5 years and then they can be sold for $500 in scrap.

On 31 July 2024, the team will have completed their one year. What would be the depreciation expense per laptop using the straight-line method for 2024 and 2025? What will be the depreciated value of a laptop in 2025?

By how much will the depreciated value of a laptop differ in 2025 if the reducing balance method @ 35% is used instead?

Reference answers:
# Straight line method
Value of the laptops = $10000
Scrap value = $500
Net = $10000 - $500 = $9500
The useful life of laptops = 5

Annual depreciation = $9500 / 5 = $1900

The annual depreciation of $1900 will remain the same for both years 2024 and 2025.

| Year | Depreciation | Remaining Value |
|--------|--------|--------|
| 2024 | $1900 | $8100 | 
| 2025 | $1900 | $6200 |

After depreciation, the value of a laptop will be $6,200 in 2025.

# Reducing balance method

In the reducing balance method, a large amount of the value of the asset is depreciated in the first year due to reasons such as technological obsolescence as laptop technology is evolving rapidly. 

Value of the laptops = $10000
Annual depreciation for 2024 = $10000 * 35% = $3500
The remaining value of the laptops will be $10000 - $3500 = $6500
Annual depreciation for 2025 = $6500 * 35% = $2275


| Year | Depreciation | Remaining Value |
|--------|--------|--------|
| 2024 | $3500 | $6500 | 
| 2025 | $2275 | $4225 |

# The difference

The difference in the valuation will be that the laptops will have a higher value (by 6200 - $4225 = $1775 = $1975) on the balance sheet of the company if the straight-line method is used.