Question

Value-Home Ltd is a construction company that recently purchased two types of equipment. Each equipment type...

Value-Home Ltd is a construction company that recently purchased two types of equipment. Each equipment type is used in a different part of a current project operation. The management has decided to use two different depreciation methods to determine depreciation charges. The data on each equipment type is summarised below:

Equipment 1

Equipment 2

Purchase date

1 July 2018

1 Oct 2018

Purchase Price

$93,000

$25,500

Installation Costs

   2,400

2,000

Residual Value

$10,000

$5,500

Useful life

8 years

4 years

Depreciation method

Diminishing Balance

Sum of the year digit

Required (show all workings):

Assuming that Value-Home Ltd.’s end of financial year is 31 December, calculate the depreciation charges for 2019 for each equipment type.

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