Reference no: EM132532187

Question - Property, Plant and Equipment

'Splash Out The Back' purchased a delivery vehicle for the business on 1 April 2020 for $27,000, paid from the business bank account. The delivery vehicle is expected to have a useful life of 8 years (or 300,000 km's), and a residual value of $3,000.

On 30 June 2022, the business sold the delivery vehicle for $22,000.

For the purposes of this activity: assume that the business has a year-end of 30 June. Ignore any GST.

Required -

1. Assume that the company uses the straight-line method of depreciation. Calculate the depreciation expense for each financial year (up to 30 June 2022), and calculate the gain/(loss) on disposal. Prepare journal entries to account for the acquisition of the delivery vehicle, depreciation expense for each financial year, and the sale of the delivery vehicle on 30 June 2022. Include dates and brief narrations for each journal entry.

2. Now assume that the company uses the units-of-production method of depreciation. show depreciation schedule for the delivery vehicle (up to 30 June 2022), assuming that the delivery vehicle was used for: 6,000 km's during the year ended 30 June 2020, 40,000 km's during the year ended 30 June 2021, 45,000 km's during the year ended 30 June 2022. Show workings.

3. Now assume that the company uses the reducing-balance method of depreciation. Calculate the deprecation rate, and show depreciation schedule for the delivery vehicle (up to 30 June 2022). Show workings.