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Sarah operates a printing business in Sydney. On 1 July 2018 she bought a new printing press for $200,000. The press was used 100% for business purposes and has an Effective Life of 8 years. Sarah opted to use the PCM to calculate depreciation. On 5 July 2020, Sarah sold the printing press. Required:   Calculate the Balancing Adjustment and discuss the tax consequences if Sarah sold the press for:   (a) $200,000    (b) $149,657.53     (c) $100,000

Sarah operates a printing business in Sydney. On 1 July 2018 she bought a new printing press for $200,000. The press was used 100% for business purposes and has an Effective Life of 8 years. Sarah opted to use the PCM to calculate depreciation. On 5 July 2020, Sarah sold the printing press. Required:   Calculate the Balancing Adjustment and discuss the tax consequences if Sarah sold the press for:   (a) $200,000    (b) $149,657.53     (c) $100,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sarah operates a printing business in Sydney. On 1 July 2018 she bought a new printing press for $200,000. The press was used 100% for business purposes and has an Effective Life of 8 years. Sarah opted to use the PCM to calculate depreciation. On 5 July 2020, Sarah sold the printing press.

Required:   Calculate the Balancing Adjustment and discuss the tax consequences if Sarah sold the press for:

  (a) $200,000    (b) $149,657.53     (c) $100,000

Expert Solution
Step 1

Depreciation is the reduction in the value of asset due to

  1. normal wear and tear
  2. Effluxion of time.

There are various method to calculate the depreciation such as

  • Straight Line Method
  • Reducing Balance Method
  • Sum of the year Digit Method
  • Sinking Fund Method

 

 

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