ACCA Applied Knowledge · Financial Accounting · Tangible non-current assets
Kelso Ltd has a machine costing $50,000 with a residual value of $2,000, depreciated on the units of production basis over an expected total output of 240,000 units. In the year ended 30 June 20X3 the machine produced 45,000 units. What is the depreciation charge for the year?
The charge is $9,000. The depreciable amount of $48,000 (cost less residual value) divided by 240,000 expected units gives $0.20 per unit, and 45,000 units produced multiplied by that rate equals $9,000. Using full cost instead gives the incorrect $9,375.
- A$9,000Correct
- B$9,375
- C$8,625
- D$10,000
Explanation
Depreciable amount = 50,000 - 2,000 = 48,000. Rate per unit = 48,000 / 240,000 = $0.20. Charge = 45,000 x 0.20 = $9,000. $9,375 arises from using cost without deducting residual value (50,000/240,000 x 45,000).
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