Question

Prepare the calculation using the prime cost method to determine the deduction in value on a depreciating asset purchased 55 days into the financial year for $150,000 and an economic life of three years.

Describe how a depreciation schedule assists an organisation to maximise its taxation deductions.

Answer 1

Solution:-

Depreciation:-

= 7,534.25

Describe how a depreciation schedule assists an organisation to maximise its taxation deductions:-

A depreciation schedule is usual to separate assets into classes which commonly represent the summary information contained in the organisation's balance sheet. These classes can be further divided into categories to represent each type of asset held.

Knowing which type of asset the company has, help the organisation to depreciate the asset with the correct rate, method and life time.

By doing the correct depreciation method the company could deduct tax from asset income, therefore reduce the amount of tax to be paid to the ATO.