Norman Ltd purchased a motor vehicle for $45 000 on 1 July 2017. The vehicle was expected to have a four-year life span. The financial period ends on 30 June. Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40 per cent, the balance of the accumulated depreciation account at 30 June 2019 was:

Question

Quizplus · Accepted Answer

To calculate the balance of the accumulated depreciation account at 30 June 2019, we need to first calculate the depreciation expense for each year.

Year 1 depreciation expense = $45,000 x 40% = $18,000 
Year 2 depreciation expense = ($45,000 - $18,000) x 40% = $10,800 
Year 3 depreciation expense = ($45,000 - $18,000 - $10,800) x 40% = $6,480

So, the accumulated depreciation account balance at 30 June 2019 would be:

Year 1: $18,000 
Year 2: $18,000 + $10,800 = $28,800 
Year 3: $28,800 + $6,480 = $35,280

Therefore, the correct answer is (C) $28,800.

Norman Ltd Purchased a Motor Vehicle for $45 000 on 1