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Chapter 3

Q. 3.6

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?

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