A fixed asset costing £138,600 is acquired on 1 October 1995. The asset has an estimated useful life of four years and an estimated residual value of

£50,000.

(a) Calculate the amount of depreciation which should be charged to the profit and loss account in relation to this asset for each of the four years to 30 September 1996, 1997, 1998 and 1999, assuming that the straightline method is to be used.

(b) Repeat your calculations, this time assuming that the asset is to be depreciated at 22.5% per annum, using the reducing-balance method and working to the nearest pound.

(c) In your opinion, which of these methods is preferable?