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Question - Nevertire Ltd purchased a delivery van costing $52,000. 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. Ignore GST.
Required -
a) Assume the van was purchased on 1 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
straight-line.
diminishing balance (depreciation rate has been calculated as 31%).
units of production (assume the van was driven 78,000 kilometres during the financial year).
b) Record the adjusting entries for the depreciation on 30 June 2021 using a diminishing balance method.
c) Show how the van would appear in the balance sheet prepared at the end of year 2 using the Straight line method.
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