Question

Consider the following data on a car: Cost basis of the asset, CO = BD 10,000, Useful life, N = 5 years, Estimated Salvage value, CL = BD 2,000. Compute the annual depreciation allowance.

Answer 1

The annual depreciation allowance for the car is BD 1,600, calculated using the straight-line depreciation method with the given cost basis, salvage value, and useful life.

Step-by-step explanation:

To calculate the annual depreciation allowance for a car, you can use the straight-line depreciation method which is commonly applied for this purpose. Given the cost basis of the asset (CO) is BD 10,000, the useful life (N) is 5 years, and the estimated salvage value (CL) is BD 2,000, the annual depreciation can be computed with the following formula:

Annual Depreciation Allowance = (Cost Basis of Asset - Estimated Salvage Value) / Useful Life

Plugging in the values provided, we find:

Annual Depreciation Allowance = (BD 10,000 - BD 2,000) / 5 = BD 8,000 / 5 = BD 1,600

Therefore, the annual depreciation allowance for the car is BD 1,600.