a firm acquired an assset on 1st Apri, 1990 at a cost of Le 30,000. The useful life of the asset is expected to be 10 years. The estimated scrap value of the asset at the end of the year is Le 2,000. Show the provision for depreciation account for the first 3 years in the life of the asset using the Straight line method

First year : Le 2100

Second year : Le 2800

Third year : Le 2800

Explanation:

Given the following :

Cost of equipment = 30,000

Useful years = 10

Salvage or scrap value = 2,000

depreciation account for the first 3 years in the life of the asset using the Straight line method :

Straight line Depreciation :

(Cost - salvage value) / useful years

First year: (April - December 1990)

April - December 1990 = 9 months

(30,000 - 2000) / 10 × 9/12

28000 / 10 × 0.75 = Le 2100

Second year:

(30,000 - 2000) / 10 × 12/12

28000/ 10 = Le 2800

Third year:

(30,000 - 2000) / 10 × 12/12

28000/ 10 = Le 2800

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