Calculating depreciable cost for straight-line depreciation

Steps:

• Identify total capitalizable cost: purchase price $30,000 + delivery$2,000 + engine improvement $4,000 =$36,000.
• Note that financing (cheque or loan) does not affect the asset's cost.
• Apply straight-line depreciation: 20% rate implies annual expense = 20% × $36,000.
• Compute for full year 2020: $36,000 × 0.20 =$7,200.

Why B is correct:

• Straight-line method depreciates historical cost (IAS 16) over useful life; 20% of total $36,000 yields$7,200 for 2020.

Why the others are wrong:

• A: Excludes engine improvement, using only $30,000 +$2,000 = $32,000 × 20$6,400 (but rounded or miscalculated).
• C: Includes all costs but applies incorrect rate or partial year: $38,500 × 20$7,700 (overstates cost).
• D: Overincludes costs or uses reducing balance: $$8,200 (inflates base).

Final answer: B