Use the information below to answer the following questions.
Norman Ltd purchased a motor vehicle for $45,000 on 1 July 2009. The vehicle was expected to have a 4-year life and a $13,000 trade-in value, and was expected to be driven for 160,000 km. The financial period ends on 30 June.
-Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40%,the balance of the accumulated depreciation account at 30 June 2011 was:
A) $28 800
B) $18 000
C) $10 800
D) none of the above.

Question

Quizplus · Accepted Answer

The reducing balance method of depreciation is calculated as follows:Depreciation expense = (Depreciation rate x Book value)Book value = (Cost of asset - Accumulated depreciation)At 30 June 2011, the book value of the motor vehicle is:Book value = $45,000 - (40% x $45,000 x 2) = $27,000Therefore, the balance of the accumulated depreciation account at 30 June 2011 is:Accumulated depreciation = $45,000 - $27,000 = $18,000

Use the Information Below to Answer the Following Questions