Adam’s mowing Limited purchased a group of new lawnmowers for $20,000at1 July 2020. As the accountant of the business, you have estimated that the mowers are to last five years and to have $500 residual value at that point. 

The entity’s business plan projects cutting 5,000 lawns over the five years, with per-year projections of 500, 1,000, 1,200, 1,800 and 500 lawns over the five years. 

Required: 

Calculate the Accumulated Depreciation balance at the end of the second year using each of the following depreciation bases. Show your working. (6 marks) straight-line diminishing balance (52 per cent rate) units-of-production. 

You are asked by the owner of the business which depreciation basis would result in the entity paying less tax at the end of the second year and so you should adopt that method for the mowers as it would save cost for the entity. Provide appropriate response to the owner’s question and request. (3 marks)