3 Furniture and vehicles were purchased on 1 July 20.21 at R80 000 and R300 000 respectively. Depreciation is written off on furniture at 12,5% per year on cost and on vehicles at 20% per year on the diminishing balance method. The necessary write- offs for the current year have been made.

Question

4 The business is not registered for VAT.
calculate the depreciation for both assets.

Answer 1

To calculate the depreciation for both furniture and vehicles, let's follow the respective depreciation methods stated.

1. Furniture

• Cost of Furniture: R80,000
• Depreciation Rate: 12.5% per annum
• Calculation: \[ \text{Depreciation (Furniture)} = \text{Cost} \times \text{Depreciation Rate} \] \[ \text{Depreciation (Furniture)} = R80,000 \times 12.5% \] \[ \text{Depreciation (Furniture)} = R80,000 \times 0.125 = R10,000 \]

2. Vehicles

• Cost of Vehicles: R300,000
• Depreciation Rate: 20% per annum (diminishing balance method)
• Calculation: \[ \text{Depreciation (Vehicles)} = \text{Cost} \times \text{Depreciation Rate} \] \[ \text{Depreciation (Vehicles)} = R300,000 \times 20% \] \[ \text{Depreciation (Vehicles)} = R300,000 \times 0.20 = R60,000 \]

Summary of Depreciation for the Current Year

• Depreciation for Furniture: R10,000
• Depreciation for Vehicles: R60,000

Thus, the total depreciation expense for the year is: \[ \text{Total Depreciation} = \text{Depreciation (Furniture)} + \text{Depreciation (Vehicles)} = R10,000 + R60,000 = R70,000 \]

Conclusion

• Depreciation for Furniture: R10,000
• Depreciation for Vehicles: R60,000
• Total Depreciation: R70,000