The Souvenir Company purchased, on 1 January 2015, a machine producing embossed souvenir badges. The machine cost £16,000 and was estimated to have a five-year life with a residual value of £1,000. The company plans on using one out of the two most important methods of deprecation which are straight line & Written down value methods. The CEO wants to decide on which method based on a few calculations that he asks you to perform which are given below. Prepare the required calculations to help the CEO arrive at a final decision.

Required

(a) Prepare a table of depreciation and net book values over the five-years using straight-line depreciation.

(b) Prepare a table of depreciation and net book value over the five years using reducing-balance depreciation.

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

(d) Using the straight-line method of depreciation, demonstrate the effect on disposing the asset at the end of Year 5 for zero.

Answer rating: 100% (QA)

a Table of Depreciation and Net Book Values using StraightLine Depreciation Year Depreciation Net Bo... View the full answer