An asset bought for £20000 with an estimated useful life of four years and anticipated costs of disposal of £4000 at the end of that time, is depreciated on a straight line basis.

(a) Ca lculate the annual depreciation expense.

(b) Pro vide journa l entries to record the dispo sal in Year 4.

Appendix Asset valuation and economic income A The basic model explained Conside r the ca se of a 'single asset fi rm' operating in an environment of certa inty and where a perfect and complete market exists for the asset owned by the firm.