Response to the following problem:
The following actual and estimated figures are available:
Cost €12,000
Useful life 4 years
Scrap value €2,000
Based on these figures, evaluate the following:
(a) Calculate annual depreciation under the straight-line method.
(b) Calculate the depreciation charge for each of the four years under the reducing balance method using a depreciation percentage of 40 per cent.
(c) If the estimated scrap value turns out to be correct and the asset is sold on the first day of year 5, list and contrast the effect on reported profit for each of the five years under each method.