Reference no: EM132367847

Question

Exercise 01 - Calculating Depreciation + GST Nevertire Ltd purchased a delivery van costing $57 200 (GST Inclusive).

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.

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 2019-20 using each of the following depreciation methods:

i. straight-line

ii. diminishing balance (assume that the depreciation rate under the diminishing balance method is 31%).

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 2019-20 using each of the following depreciation methods:

i. straight-line

ii. diminishing balance (assume that the depreciation rate under the diminishing balance method is 31%).

iii. units of production (assume the van was driven 60 000 kilometres during the financial year).

Exercise 02 - Analysing the sale of a non-current asset On 2 January 2018, Ditto Clothing Consignments purchased showroom fixtures for $12000 cash, expecting the fixtures to remain in service for five years. Ditto has depreciated the fixtures on a straight-line basis, with zero residual value. On 30 September 2019, Ditto sold the fixtures for $6200 cash. Requirement Record both depreciation for 2019 and the sale of the fixtures on 30 September 2019, assuming that Ditto's financial year ends 30 June (ignore GST).