QUESTION 2 (20 MARKS)

Fleet Rentals purchased equipment with a cost of RM200,000 at the beginning of 2019. The equipment has an estimated life of 10 years or 100,000 units of product. The estimated residual value is RM20,000. During 2019, 11,000 units of product were produced with this machinery.

1. Explain the relationship between the book value of a plant asset, the market value of the plant asset and the residual value of a plant asset?

(4 marks)

2. Amount of total accumulated depreciation at December 31, 2019, using units-of-production depreciation)

(4 marks)

3. Book value at the end of 2019 using straight-line depreciation.

(5 marks)

4. Why would the company choose units-of-production depreciation instead of straight-line?

(4 marks)

5. State the accounting concept involved in providing depreciation on non-current assets.

(3 marks)