Depreciation methods Nevertire Ltd purchased a delivery van costing $52 000. It is expected to have...

Depreciation methods

Nevertire Ltd purchased a delivery van costing $52 000. It is expected to have a residual value of $12 000 at the end of its useful life of 4 years or 200 000 kilometres. Ignore GST. Required (a) Assume the van was purchased on 2 July 2019 and that the accounting period ends on 30 June. Calculate the depreciation expense for the year 2019–2020 using each of the following depreciation methods: i. straight‐line ii. diminishing balance iii. units of production (assume the van was driven 78 000 kilometres during the financial year).

(b)Assume the van was purchased on 1 October 2019 and that the accounting period ends on 30 June. Calculate the depreciation expense for the year 2019–2020 using each of the following depreciation methods: i. straight‐line ii. diminishing balance iii. units of production (assume the van was driven 60 000 kilometres during the financial year).

note the following

• When an asset is purchased part way through a year you should round to a whole month. So for 2nd July assume they have owned it ALL of July.

• For the diminishing balance method you are not expected to be able to calculate the percentage yourself. For this question use a percentage of 28% for this method.

Solutions

Expert Solution

In Case 1 Depreciation is calculated for whole year as the July is considered as full month for Accounting Period July, 2019 to June, 2020.

Case 2 As the Asset is purchased on 01.10.2019 , The Depreciation is calculated for 9 months for Accounting Period

July, 2019 to June, 2020.

ekkarill92 answered 1 year ago

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