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Financial Accounting by Robert Nothhelfer

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6Case studies

Case 1: Depreciation and advance payments

Carpenter Karl Dach needs a new van. The van will be delivered on 18 January 20X1, payable within 1 week at a 1%discount or within 4 weeks net. Karl Dach does not use the discount, so the van costs €28,800 net. For transfer and registration, the dealer charges €400 net. The useful life is estimated at 5 years. The reselling value after 5 years for the used vehicle is estimated roughly at €3,000.

  1. Calculate the depreciation and prepare the depreciation schedule according to the straight-line (linear) method. Assume that Karl uses all usual options!
  2. At the beginning of 20X2, Karl Dach upgrades the car with a navigation system for €2,000. What effect does this have on the depreciation schedule? ...

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