On 31 December 2017, a new motor vehicle with a useful life of five years and an estimated residual value of $5,000 was purchased by a business at a cost of $35,000. The amount of depreciation expense charged for the six months ended 30 June 2018, using the straight-line method, is:
A)nil.
B)$3,000.
C)$25,000.
D)$4,000.

Question

Quizplus · Accepted Answer

The depreciable cost of the vehicle is calculated as follows:

Cost of the vehicle = $35,000
Residual value = $5,000
Depreciable cost = $30,000

The annual straight-line depreciation expense is calculated as follows:

Depreciable cost / Useful life = Annual depreciation expense
$30,000 / 5 years = $6,000 per year

For the six months ended 30 June 2018, the depreciation expense would be half of the annual amount:

$6,000 / 2 = $3,000

Therefore, the correct answer is B.

On 31 December 2017, a New Motor Vehicle with a Useful