Morgan Ltd purchased a vehicle on 1 July 2023, at a cost of $68,000, plus delivery costs of $1,200. The estimated useful life of the vehicle is 8 years, with an estimated residual value at the end of that period of $12,000. The entity is considering different depreciation methods that could be used for financial reporting purposes for the year ended 30 June 2024. 
 
The diminishing balance method uses a depreciation rate of 19.75%.
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**** 
**Required:** 
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a.      Calculate the depreciation expense and carrying value of the asset at 30 June 2024, using the straight-line method (answer in the space provided).

To calculate the depreciation expense and carrying value of the vehicle at 30 June 2024 using the **straight-line method**, we need to follow these steps:

### Step 1: Calculate the total cost of the vehicle
The total cost of the vehicle includes both the purchase price and the delivery costs.

- **Cost of vehicle** = $68,000
- **Delivery costs** = $1,200
- **Total cost** = $68,000 + $1,200 = **$69,200**

### Step 2: Calculate the annual depreciation
Under the **straight-line method**, the depreciation expense is calculated based on the following formula:

\[
\text{Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Residual Value}}{\text{Useful Life}}
\]

- **Cost of Asset** = $69,200
- **Residual Value** = $12,000
- **Useful Life** = 8 years

\[
\text{Depreciation Expense} = \frac{69,200 - 12,000}{8} = \frac{57,200}{8} = 7,150 \, \text{per year}
\]

### Step 3: Calculate the depreciation expense for the period (1 July 2023 to 30 June 2024)
Since the vehicle was purchased on 1 July 2023, and we are calculating depreciation for the period ending on 30 June 2024, which is exactly one year, the depreciation expense for this period is simply **$7,150**.

### Step 4: Calculate the carrying value at 30 June 2024
The carrying value at the end of the period is calculated as the total cost minus the accumulated depreciation.

\[
\text{Carrying Value} = \text{Cost of Asset} - \text{Depreciation Expense}
\]

\[
\text{Carrying Value} = 69,200 - 7,150 = 62,050
\]

### Final Answer:
- **Depreciation Expense for the year** = **$7,150**
- **Carrying Value at 30 June 2024** = **$62,050**

Would you like any further details or clarifications on the calculations?

Here are 5 related questions for further exploration:
1. How would the depreciation expense change if the residual value were different?
2. What are the advantages and disadvantages of the straight-line method of depreciation?
3. How would the depreciation be calculated under the diminishing balance method for the same vehicle?
4. How does the choice of depreciation method affect financial statements and tax reporting?
5. What would happen if the estimated useful life of the vehicle changes after the purchase?

**Tip:** Always make sure to apply the correct depreciation method based on the asset type and reporting requirements, as different methods affect the financial results in various ways.

Morgan Ltd purchased a vehicle on 1 July 2023, at a cost of $68,000, plus delivery costs of $1,200. The estimated useful life of the vehicle is 8 years, with an estimated residual value at the end of that period of $12,000. The entity is considering different depreciation methods that could be used for financial reporting purposes for the year ended 30 June 2024. The diminishing balance method uses a depreciation rate of 19.75%. Required: a. Calculate the depreciation expense and carrying value of the asset at 30 June 2024, using the straight-line method.

Learn how to calculate the depreciation expense and carrying value of a vehicle using the straight-line method for financial reporting purposes. This example covers the calculation for a vehicle purchased for $69,200, with a useful life of 8 years and a residual value of $12,000, resulting in a depreciation expense of $7,150 and a carrying value of $62,050 at 30 June 2024.

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