The same business bought a motor vehicle for £5,000 on 1 Apri11989. It was decided to depreciate it by 30% per annum using the reducing instalment method. Calculate the amount of depreciation to be written off in the financial year ended 31 December 1989.

Take care when calculating these proportions. In most examination questions the asset is purchased at the beginning or the end of a month.

While 1 April to 31 December will be counted as nine months, if the asset had been purchased on 30 April it will have been used for only eight months in 1986. Thus in the latter case the proportion would be s /12 or 2/3.

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