A retailer purchased a delivery van for $34 000 on 1 July 2018. It was planned to keep the vehicle until it had done 80 000 kilometres and then to trade it in. The expected trade in value was $6 000. A schedule of actual distance travelled was: 28 000 km on 30/6/19; 25 000 km on 30/6/20; 15 000 km on 30/6/21; 12 000 km on 30/6/22. Using the units-of-production method, the amount of depreciation charged for the year ended 30 June 2021 was: a. $9800. b. $5250. c. $3500. d. $4800. e. $4200.
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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A retailer purchased a delivery van for $34 000 on 1 July 2018. It was planned to keep the vehicle until it had done 80 000 kilometres and then to trade it in. The expected trade in value was $6 000.
A schedule of actual distance travelled was: 28 000 km on 30/6/19; 25 000 km on 30/6/20; 15 000 km on 30/6/21; 12 000 km on 30/6/22.
Using the units-of-production method, the amount of
depreciation charged for the year ended 30 June 2021 was:a. $9800.
b. $5250.
c. $3500.
d. $4800.
e. $4200.
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