The following actual and estimated figures are available.

Based on these figures, evaluate the following.

a. Calculate annual depreciation under the straight-line method.

b. Calculate the depreciation charge for each of the four years under the reducing balance method using a depreciation percentage of 40 per cent.

c. If the estimated scrap value turns out to be correct and the asset is sold on the first day of year 5, list and contrast the effect on reported profit for each of the five years under each method.

Transcribed Image Text:

Cost Useful life Scrap value 12,000 4 years 2,000