On 31 December 2013,a new motor vehicle with a useful life of five years and an estimated residual value of $5,000 was purchased by a business at a cost of $25,000.The amount of depreciation expense charged for the six months ended 30 June 2014,using the straight-line method,is:
A) nil.
B) $2,000.
C) $25,000.
D) $4,000.

Question

Quizplus · Accepted Answer

Since the motor vehicle was purchased on December 31, 2013, the business would not charge any depreciation expense for that year. The useful life of the vehicle is five years, and the estimated residual value is $5,000. Therefore, the depreciable cost of the vehicle is $25,000 - $5,000 = $20,000. The depreciation expense using straight-line method is calculated by dividing the depreciable cost by the useful life. Thus, the annual depreciation expense would be $20,000 / 5 = $4,000. For the six months ended 30 June 2014, the depreciation expense would be half of the annual amount, which is $4,000 / 2 = $2,000. Therefore, the correct answer is B.

On 31 December 2013,a New Motor Vehicle with a Useful