Use the information below to answer the following questions.
Norman Ltd purchased a motor vehicle for $45,000 on 1 July 2009. The vehicle was expected to have a 4-year life and a $13,000 trade-in value, and was expected to be driven for 160,000 km. The financial period ends on 30 June.
-Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40%,the net book value at 30 June 2012 was:
A) $9720
B) $16 200
C) $35 280
D) none of the above.

Question

Quizplus · Accepted Answer

The reducing balance method applies a fixed percentage to the book value each year. For the first year: $45,000 * 40% = $18,000 depreciation, leaving $27,000. Second year: $27,000 * 40% = $10,800 depreciation, leaving $16,200. Third year: $16,200 * 40% = $6,480 depreciation, leaving $9,720.

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