Question 4

On 1 January 2020 Chris Bell spent $112,000 purchasing an equipment for business use. It is expected to have a residual value of $12,000 at the end of its useful life of 5 years or 500000 units of production.Ignore GST.

Required:

Assume accounting period ends on 30 June every year. Calculate the depreciation expense for the year 2019-20 using each of the following depreciation methods:

i.Straight-line

ii.Diminishing balance

iii.Units of production (assume the equipment has produced 182,500 units during the financial year).

Prepare the accounting entries to record the depreciation on 30 June 2020 using straight line method.