Terrapin Media Agency paid £12,000 for a car for a sales manager on 1 April 2013.
The depreciation rate is 40% p.a. What is the depreciation for each of the three financial
years ending on 31 March 2016, on a diminishing balance basis?
Chapter 3
Q. 3.6
Step-by-Step
Verified Solution
Year 1: £4,800, Year 2: £2,880, Year 3: £1,728
Workings:
| Cost | 12,000 |
| Depreciation: Year to 31 March 2014 (40% \times £12,000 ) | \frac{4,800}{7,200} |
| Depreciation: Year to 31 March 2015 (40% \times £7,200 ) | \frac{2,880}{4,320} |
| Depreciation: Year to 31 March 2016 (40% \times £4,320 ) | \frac{1,728}{2,592} |
etc. until sold or scrapped