Question 3 (11 marks)

1. RK Co purchased a machine on 1st November 2020 at the cost of $110,000 (inclusive of GST) and exclusively used it to manufacture for the Cos production. The machines effective life is ten years.

2. Andy purchased a Toyota car and use it 100% for business purpose on 1st October 2020 at the cost of $74,000 (inclusive GST), estimated to have a useful life of twelve years.

Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the car discussed above, using both prime cost and diminishing value methods.