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Nevertire Ltd purchased a delivery van costing $52,000. It is expected to have a residual value of $12,000 at the end of its useful life
Nevertire Ltd purchased a delivery van costing $52,000. It is expected to have a residual value of $12,000 at the end of its useful life of 4 years or 200,000 kilometres.Ignore GST.
Required
- Assume the van was purchased on 1 July 2019 and that the accounting period ends on 30 June. Calculate the depreciation expense for the year 2019-20 using each of the following depreciation methods
- straight-line
- diminishing balance (depreciation rate has been calculated as 31%)
- units of production (assume the van was driven 78,000 kilometres during the financial year).
- Record the adjusting entries for the depreciation at 30 June 2021 using diminishing balance method.
- Show how the van would appear in the balance sheet prepared at the end of year 2 using Straight-line method.
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