ACCOUNTING

[m2121]

Can someone explain how to calculate/do this question?? I'm unsure of my answer to question g of this exercise 15.7

[IceWallowCome]

Im not gonna do the question, but ill tell you the sac on chapters 13-16 is fucking hard

[DoctorTwo]

I have done these but I don't have my book on me now, so I'll provide rough answers
a. The straight-line method uses the same depreciation expense (10% of historical cost), so this may be why the owner thinks it upholds consistency.
b. Consistency isn't about using the same numbers throughout reporting periods, it's about using the same accounting methods
c. I guess it's whether the shop equipment has moving parts or not. If it does, reducing balance should be used, and if not, straight-line should be used.
d. 13200/1.1 (to remove GST) = $12000 historical cost. 12000*0.1 (10%) = $1200 (depreciation expense for 1 year) 1200. It's worth noting that the asset has only been owned for 6 months, but the question asks to depreciate for the 'year ending', not the life of the asset.
e. $12000*0.15 = $1800 (per year). 1800.
f. Using straight-line depreciation will cause net profit to be higher by $600 than if reducing balance was used because the depreciation expense is $1200 for straight-line (remember net profit = revenue less expenses so less expenses means higher net profit) and $1800 for reducing balance. This is because the reducing balance method allocates more depreciation expense at the start of the asset’s life when it is newer and can contribute more to revenue.
g. Depreciation expense under straight-line will always be $1200.
For the first year, you have to figure out the carrying value, so do $12000 (historical cost) - $1800 (depreciation expense for year 1) = $10200.
Reducing balance for year 2 = $10200 * 0.15 = $1530. Still higher than straight-line. 10200-1530 = $8670 (carrying value after year 2)
Reducing balance for year 3 = $8670 * 0.15 = $1300.5. Still higher than straight-line. 8670 - 1300.5 = $7369.5 (carrying value after year 3)
Reducing balance for year 4 = 7369.5 * 0.15 = $1105.4. Lower than straight-line!
The answer is 2019 because it took 4 years from July 1 for the depreciation expense of reducing balance (1105.4) to dip below straight-line. (1200)
*The answers calculate it differently and ask for the year ended 30 June, whereas the workbook asks for year ended 31 December, so the textbook's answer is 30 June 2017/18, and mine is 30 December 2019.

EDIT: Corrected most answers.

[m2121]

Don’t quite understand how to calculate question 6a from information given but answer is $200