Archer, Maddie and Dillon have asked you for further information to assist them to make a decision regarding the delivery van. Specifically, you are required to:
a. Calculate the annual depreciation on the brand-new delivery van over the eight years of its useful life using the diminishing balance method.
the diminishing balance depreciation rate is 12.8314%.
b. Compare and contrast both options (brand-new van vs Kombi van) in terms of the initial impact that each option will have on the balance sheet.
c. Compare and contrast both options (brand-new van vs Kombi van) in terms of the longer-term impact that each option will have on the balance sheet.
d. Discuss how the professional judgement exercised by the accounting team may have impacted on the analysis undertaken in part c above. Could such judgements influence management’s decision regarding which motor vehicle to purchase?
e. Identify and briefly explain five other factors that should be considered before making a decision as to which van to purchase.