Annual depreciation can be claimed as tax deduction

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Reference no: EM133209499

A car is bought for $35 000 and a scrap value of $10 000 is set for it. The following three options for depreciating the car are available:

i. ?at rate of 10% of the purchase price each year

ii. 20% p.a. of the reducing balance

iii. 25 cents per km driven (the car travels an average of 10 000 km per year).

A. it Which method will enable the car to reach its scrap value sooner?

B. If the car is used in a business the annual depreciation can be claimed as a tax deduction. What would the tax deduction be in the first year of use for each of the depreciation methods?

C. How would your answers to part b vary for the 5th year of use?

Reference no: EM133209499

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