Calculate the cost of the machine

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(i) Different methods of depreciation are acceptable under the Financial Reporting Standards and to the Inland Revenue Department. Discuss, with examples, the criteria for deciding which method of depreciation to choose.

(ii) Rhonda Factory makes toys. On 1 January they bought a new machine for making plastic bricks. The machine cost $32,000, transport and transit insurance costs to get it to the factory were $1,200, and installation costs were $3,800. Once it was installed an insurance policy for the coming year of $600 was paid. The machine has an estimated life of five years and an estimated residual value of $5,000. Calculate the cost of the machine which will be capitalised and then calculate the depreciation charge for a year if the straight-line method is used.

(iii) On 1 January 2020 Double-Up Supermarkets purchased a new delivery van for $50,000. The estimated useful life is four years and the estimated residual value is $10,000. Calculate the depreciation for each year of the estimated life of the delivery van using the reducing balance method of depreciation at a rate of 33% and show what the net book value will be at 31 December 2023. In the table below enter your answers for (a) (b) (c) and (d). Round your answers to the nearest dollar.

Reference no: EM132706174

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