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Transcription of this question: Scoot Fun (SF)Scy»ot Fun (SF) is a family-owned private limited company specializing in scooter rentals to a studentmarket segment. Most Of the scooters will need replacement in January 2014. SF will purchase20 new scooters ata total cost of S80000_ They are expected to have a useful life of four years andthe total residual value (scrap value) of the 20 scooters is estimated at S4000.SF’s Finance Manager currently uses a straight line method Of depreciation, but she has now decidedto adopt a reducing balance method of depreciation. However, she is still considering the percentagerate at which the assets (scooters) should be depreciated. The Finance Manager is also looking forvarious sources Of finance for the purchase Of the new scooters.SF’s shareholders would like to receive higher dividends in the coming year. One way to do this is tofind a legal way to reduce SFS tax expense in the coming year.(a)(b)Describe one advantage and one disadvantage Of a private limited company.Explain two appropriate sources Of finance that SF could use to purchase the20 new scooters.[4 marks][4 marks](i)(ii)(iii)Using the straight line method Of depreciation, calculate the depreciationfor each year and the book value (value Of scooters less depreciation) Ofthe 20 new scooters at the end Of each year Of their expected useful life(four years) (show all your working).Using the reducing balance method Of depreciation, calculate thedepreciation for each year and the book value (value Of scooters lessdepreciation) Of the 20 new scooters at the end Of each year Of theirexpected useful life (four years). Use a 40% depreciation rate (show allyour w0 rking)Explain one consequence Of the Finance Manager ‘s decision regarding thepercentage rate at which the assets should be depreciated.(d)Examine the decision Of SF’s Finance Manager to change the depreciationmethod from straight line to reducing balance.[4 marks][4 marks][3 marks][6 marks]

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