A food processing company purchased, on 1 January Year 1, a canning machine. The machine costs £24,000 and was estimated to have a 5-year life with a residual value of £2,000.

Required:

(a) Prepare a table of depreciation charges and net book value over the 5-year life using straight-line depreciation.

(b) Make a guess of the percentage rate to be used in the reducing-balance calculation and prepare a table of depreciation charges and net book value over the 5 years using reducingbalance depreciation.

(c) Using the straight-line method of depreciation, explain the effect on the accounting equation of selling the asset at the end of Year 5 for a price of £2,500.

(d) Using the straight-line method of depreciation, explain the effect on the accounting equation of disposing of the asset at the end of Year 5 for a zero scrap value.