ACCA Applied Knowledge · Financial Accounting · Depreciation
Delta Ltd bought a vehicle on 1 April 20X1 for $48,000, with no residual value and a 4-year life. It charges depreciation straight-line, pro rata by month in the year of acquisition, and has a 31 December year end. What is the depreciation charge in the year ended 31 December 20X1?
The charge is $9,000. Annual straight-line depreciation is $12,000 ($48,000 over four years), and the vehicle was owned for nine months of the year from 1 April to 31 December, so the charge is 9/12 of $12,000. A full-year charge would be wrong.
- A$9,000Correct
- B$12,000
- C$3,000
- D$36,000
Explanation
Annual depreciation = 48,000 / 4 = 12,000. The vehicle was held for 9 months in 20X1, so the charge is 12,000 x 9/12 = 9,000. A full-year charge of $12,000 ignores the time apportionment.
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