WHICH DEPRECIATION?

a $=13$

You purchase a truck for business purposes. The truck costs $10,000$ multiplied by a dollars $($e$.$g$.10,000$ x $12=$$$120,000)$ and its scrap value is $2,300$ multiplied by a dollars $($e$.$g$.2,300$ x $12=$$$27,600).$

The following three options for depreciating the truck are available: i flat rate of $15\%$ of the purchase price each year ii $25\%$ p$.$a$.$ of the reducing balance iii $28$ cents per km driven $($assume the truck travels an average of $14000$ km per year$).$

TASKS: $1.$ Create a depreciation schedule for each of the depreciation methods, with yearly entries up to and including the scrap value $($or a book value of zero$).2.$ Which method will enable the truck to reach its scrap value sooner? Explain why this is so by using your schedules in Task $1.3.$ What would the tax deduction be in the first year and the fifth year of use for each of the depreciation methods? How would your answers vary for the $5$th year of use compared to the first year?WHICH DEPRECIATION?

$a=13$

You purchase a truck for business purposes. The truck costs $10,000$ multiplied by a dollars $($e$.$g$.$

$10,00012=$$$120,000)$ and its scrap value is $2,300$ multiplied by a dollars $($e$.$g$.2,300$

$12=$$$27,600).$

The following three options for depreciating the truck are available:

i flat rate of $15\%$ of the purchase price each year

ii $25\%$ p$.$a$.$ of the reducing balance

iii $28$ cents per km driven $($assume the truck travels an average of $14000km$ per year$).$

TASKS:

Create a depreciation schedule for each of the depreciation methods, with yearly entries up

to and including the scrap value $($or a book value of zero$).$

Which method will enable the truck to reach its scrap value sooner? Explain why this is so by

using your schedules in Task $1.$

What would the tax deduction be in the first year and the fifth year of use for each of the

depreciation methods? How would your answers vary for the $5$th year of use compared to the

first year?