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An enterprise provides each of its directors with a car. The company purchases these at £40,000 each. After 4 years of use it replaces each vehicle and sells the old vehicles. It does this through

An enterprise provides each of its directors with a car. The company purchases these at £40,000 each. After 4 years of use it replaces each vehicle and sells the old vehicles. It does this through

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hint: Use the reducing balance equation
An enterprise provides each of its directors with a car. The company purchases these at £40,000 each. After 4 years of use it replaces each vehicle and sells the old vehicles. It does this through an auction whilst placing a reserve price of 50% below the original cost. Using the reducing balance method of depreciation determine the annual change in value for each of the four years that the vehicle is owned. Once you have done that, answer the following: What is the annual rate of depreciation? 22% 16% 5% 12%
Transcribed Image Text:An enterprise provides each of its directors with a car. The company purchases these at £40,000 each. After 4 years of use it replaces each vehicle and sells the old vehicles. It does this through an auction whilst placing a reserve price of 50% below the original cost. Using the reducing balance method of depreciation determine the annual change in value for each of the four years that the vehicle is owned. Once you have done that, answer the following: What is the annual rate of depreciation? 22% 16% 5% 12%
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