The following extracts are made from the books of Agama Enterprises. Motor van (cost) 120000 Life span 4 years rate of Depreciation 40% Method of depreciati...

The following extracts are made from the books of Agama Enterprises.

Method of depreciation used is Diminishing Balance The depreciation charge for year two is

Answer Details

First, we calculate the depreciation for the first year: Depreciation for year one = Cost x Rate of Depreciation = 120,000 x 40%
= 48,000
Next, we calculate the remaining book value after the first year: Book value after year one = Cost - Depreciation for year one
= 120,000 - 48,000
= 72,000
To calculate the depreciation charge for year two, we apply the rate of depreciation to the remaining book value Depreciation for year two = Remaining book value x Rate of Depreciation
= 72,000 x 40%
= 28,800