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 depreciation expense for the year ending 30 June 2017 is:

Question

Quizplus · Accepted Answer

Using the reducing balance depreciation method, the depreciation rate for the second year would be 40% of the carrying value at the start of the year.

Carrying value at the start of the second year (30 June 2016):
Cost - depreciation of Year 1 = $45,000 - (40% x $45,000) = $27,000

Depreciation expense for Year 2 (ending 30 June 2017):
40% x $27,000 = $10,800

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