Magnificent Constructions Ltd purchased a truck costing $105,000. It is expected to have a residual value of $5,000 at the end of its useful life of 10 years or 260,000 kilometres. Ignore GST.
Required:
- Assume the truck was purchased on 1 July 2018 and that the accounting period ends on 30 June. Calculate the depreciation expense for the third year using each of the following depreciation methods
- straight-line
- diminishing balance (depreciation rate has been calculated as 20%)
- units of production (assume the truck was driven 30,000 km, 50,000 km, 60,000 km respectively in year 1, 2 and 3).
- Prepare partial financial statement that shows how the truck appear in the financial statement prepared at the end of year 3 using diminishing balance method.
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