Question

Consider the following scenario:-

our organisation has purchased a new photocopier at a cost of $17,000. The purchase was made in July so there is no need to calculate depreciation for part of the first year. The copier will be outdated and written off after five years at a book value of zero.

Describe how to use the diminishing value method and the prime cost method, and detail the cost each year to be allocated for reporting purposes and show the book value during each year.

Show your results in a table with comparisons between the two methods as follows:-

Prime cost method:-

	Open Written Down Value	Days Held	Days in Year	Depreciation	Closed Written Down Value
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6

Diminishing Value Method:-

	Open Written Down Value	Days Held	Days in Year	Depreciation	Closed Written Down Value
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6

Please consider it is in Australian Taxation Environment, and please type up your answer!!

Answer 1

Below are the calculations:

	Open Written Down Value	Days Held	Days in Year	Depreciation	Closed Written Down Value
Year 1	17,000	184	365	1,714	15,286
Year 2	15,286	365	365	3,400	11,886
Year 3	11,886	365	365	3,400	8,486
Year 4	8,486	366	366	3,400	5,086
Year 5	5,086	365	365	3,400	1,686
Year 6	1,686	181	365	1,686	-

	Open Written Down Value	Days Held	Days in Year	Depreciation	Closed Written Down Value
Year 1	17,000	184	365	5,159	11,841
Year 2	11,841	365	365	7,128	4,713
Year 3	4,713	365	365	2,837	1,876
Year 4	1,876	366	366	1,129	747
Year 5	747	365	365	449	297
Year 6	297	181	365	89	208