AU Removals’ financial year ends on 30 June each year. On 1 July 2019, AU Removals purchased a truck for $168,000. You are the accountant of the business and you have estimated that the truck is to last 15 years and to have $7,000 residual value at that point. As per the business plan, the truck can be used to drive 350,000 kilometres over the 15 years, with per-year projections of 21,000 km, 28,000 km, 25,200 km, respectively over the first three years. Required: Calculate the accumulated depreciation balance at the end of the second year using each of the following depreciation bases. Show your workings. Your calculations should be rounded to the nearest whole number dollar amount. 1. straight-line diminishing balance (19 per cent rate) units-of-production.
AU Removals’ financial year ends on 30 June each year. On 1 July 2019, AU Removals purchased a truck for $168,000. You are the accountant of the business and you have estimated that the truck is to last 15 years and to have $7,000 residual value at that point. As per the business plan, the truck can be used to drive 350,000 kilometres over the 15 years, with per-year projections of 21,000 km, 28,000 km, 25,200 km, respectively over the first three years. Required: Calculate the accumulated depreciation balance at the end of the second year using each of the following depreciation bases. Show your workings. Your calculations should be rounded to the nearest whole number dollar amount. 1. straight-line diminishing balance (19 per cent rate) units-of-production.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
AU Removals’ financial year ends on 30 June each year. On 1 July 2019, AU Removals purchased a truck for $168,000. You are the accountant of the business and you have estimated that the truck is to last 15 years and to have $7,000 residual value at that point. As per the business plan, the truck can be used to drive 350,000 kilometres over the 15 years, with per-year projections of 21,000 km, 28,000 km, 25,200 km, respectively over the first three years.
Required:
- Calculate the
accumulated depreciation balance at the end of the second year using each of the following depreciation bases. Show your workings. Your calculations should be rounded to the nearest whole number dollar amount. - 1. straight-line
- diminishing balance (19 per cent rate)
- units-of-production.
Expert Solution
Step 1
Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life of the assets
= (168000-7000)/15 years
= $10,733
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