Exercise 14.4 Depreciation methods Non-GST version

Express Taxis Ltd purchased a new van costing $80 000 and paid an additional $25 000 for wheelchair conversion. It is expected to have a residual value of $15 000 at the end of its useful life of 6 years or 300 000 kilometres. Ignore GST.

Required

(a)Assume the van was purchased on 2 July 2022 and that the accounting period ends on 30 June. Calculate the depreciation expense for the year 202223 using each of the following depreciation methods:

i. straight-line

ii. diminishing balance iii. units of production (assume the van was driven 98 000 kilometres during the financial year).

(b)Assume the van was purchased on 31 August 2022 and that the accounting period ends on 30 June. Calculate the depreciation expense for the year 202223 using each of the following depreciation methods:

i. straight-line

ii. diminishing balance

iii. units of production (assume the van was driven 68 000 kilometres during the financial year).