Question

Q1 Goodfood Pty Ltd purchased a fridge for $25,000 on 1 January for 100% business use. The effective life of the fridge is 10 years. If the company uses the prime cost method to calculate the depreciation, the depreciation for that financial year should be ______.

Select one:

a. $20,000

c. $5,000

d. $1,250

Q2 Goodfood Pty Ltd purchased a fridge for $25,000 on 1 January for 50% business use. The effective life of the fridge is 10 years. If the company uses the prime cost method to calculate the depreciation, the business depreciation for that financial year should be ______.

Select one:

a. $10,000

b. $2,500

Q3 Goodfood Pty Ltd purchased an industrial fridge for $50,000 on 1 January. It has an effective life of 10 years. If the company chooses to use the diminishing value method, the decline in value in that financial year would be _______.

Select one:

a. $12,500

b. $5,000

c. $2,500

Q4 Daniel, a non-small-business entity taxpayer, acquired a camera on 1 July 2017 for $850. The camera has an effective life of 5 years. The camera is used for income producing purposes. The decline in value of the camera using low-value asset pooling would be _____ for the 2019 financial year.

Select one:

b. $259

c. $130

d. $159

Answer 1

1) depreciation for the financial year under prime cost method -

Deprection =( cost - salvage value)÷estimated useful life of the asset

Therefore here , depreciation - 25000$÷10= 2500$ per year

Therefore and is 2500$

2)using the same logic of q1) depreciation =

25000$÷10 =2500$

But since it is used for 50% business..the deprection for the year should be

2500$*50%= 1250$

3) Depreciation under diminishig value method

Using the above formula

Ie,50000$÷10year=5000$

Therefore deprection is 5000$ option (b)

4)deprection = 850$÷ 5 year= 170$

Therefore deprection for 2019 is 170$