A new company began trading on 1 January 1986. Its ftxed assets included new machinery which it had purchased for £13,000. This machinery had a life expectancy of eight years with an estimated scrap value of £1 ,000 after that time.

(a) Calculate the amount of depreciation to be written off each year.

(b) State the value of this machinery at the end of 1989.

It is possible to obtain a valuation of an asset at any stage of its working life by referring to a schedule such as the one below. This relates to the machinery in Exercise 11.1.

Machinery X: cost £13,000 Depn for the year Accumulated depn up Asset value at Year ended 31 Dec. to the year ended 31 Dec. 31 Dec.

£ £ £

1986 1,500 1,500 11,500 1987 1,500 3,000 10,000 1988 1,500 4,500 8,500 1989 1,500 6,000 7,000 1990 1,500 7,500 5,500