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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 at 30 June 2021 using diminishing balance method.
c) Show how the van would appear in the balance sheet prepared at the end of year 2 using Straight-line method.
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