Calculate the depreciation under each of the three methods

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Question - Cycling Deal purchased a Toyota truck on 1st July 2020, for $90,000, funded via a bank loan. The truck will be used to store and transport bicycles to and from each of the weekly markets. Mr Richardson have contacted you to find out how he needs to account for depreciation. He would like to use the cost model, but don't have any understanding of the straight-line method, units-of-production method and reducing balance method. The truck has an estimated useful life of ten years (300,000 kilometres), and the estimated residual value is $10,000.

Mr Richardson estimate that the truck will travel 26,000km/year in years 1 - 5, 30,000km/year in years 6 - 8, and 40,000km/year in years 9 - 10.

Required - Calculate the depreciation under each of the three methods. To illustrate the differences in the annual depreciation expense to Mr Richardson, make a depreciation schedule (for the entire useful life of the truck) using each of the three methods. When preparing the depreciation schedule using the reducing balance method, use 2 times the straight-line rate. Ignore any GST. Show all relevant workings.

Reference no: EM132605056

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