Norman Ltd purchased a motor vehicle for $45 000 on 1 July 2015.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 2017 was:

Question

Quizplus · Accepted Answer

The reducing balance method applies a fixed percentage to the book value each year. For the first year, depreciation is $45,000 x 40% = $18,000. The book value at the end of the first year is $45,000 - $18,000 = $27,000. For the second year, depreciation is $27,000 x 40% = $10,800. The accumulated depreciation at the end of the second year is $18,000 + $10,800 = $28,800.

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