Reference no: EM133000021

On 1 July 2014, Star Limited purchased a motor vehicle at a cost of $50,000 with an estimated useful life of 4 years or 100,000 kilometres. The residual value after 4 years was estimated to be $6,480. It had not decided yet which depreciation method should to be applied to this vehicle.

Year ending 30 June           Kilometres Travelled

2015                                     20,000

2016                                     25,000

2017                                     30,000

Ignore GST for this exercise.

Required:

Problem 1: Calculate depreciation for three years ending 30 June 2017 and Show how the asset will appear in the balance sheet as at 30 June 2017 under each of the following depreciation methods:

i. Straight-line method

ii. Diminishing balance method (use 40% rate of depreciation)

iii. Units-of-production method Note: All calculations must be shown in support of your answer.