2. Rayif wants to sell a jeep which has been used for eight years. The vehicle costs him RM62,000 when it was purchased brand new. The jeep is estimated to have a scrap value of RM8,000 after 15 years. He asked two agents to sell his vehicle. Agent A uses the sum- of-year digits method to calculate depreciation while agent B uses the declining balance method. a) Construct the depreciation schedules for the first eight years. b) Which agent should Rayif choose to sell his Jeep?
2. Rayif wants to sell a jeep which has been used for eight years. The vehicle costs him RM62,000 when it was purchased brand new. The jeep is estimated to have a scrap value of RM8,000 after 15 years. He asked two agents to sell his vehicle. Agent A uses the sum- of-year digits method to calculate depreciation while agent B uses the declining balance method. a) Construct the depreciation schedules for the first eight years. b) Which agent should Rayif choose to sell his Jeep?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:2. Rayif wants to sell a jeep which has been used for eight years. The vehicle costs him
RM62,000 when it was purchased brand new. The jeep is estimated to have a scrap value
of RM8,000 after 15 years. He asked two agents to sell his vehicle. Agent A uses the sum-
of-year digits method to calculate depreciation while agent B uses the declining balance
method.
a) Construct the depreciation schedules for the first eight years.
b) Which agent should Rayif choose to sell his Jeep?
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