ACCA Applied Knowledge · Financial Accounting · Depreciation
Quill Co bought a machine for $60,000 on 1 April 20X1. It depreciates machinery at 25% per annum reducing balance, with a full year's charge in the year of purchase and none in the year of disposal. The year end is 31 December. What is the carrying amount at 31 December 20X2?
The carrying amount is $33,750. A full year's depreciation applies in the year of purchase, so the 20X1 charge is $15,000, leaving $45,000. The 20X2 charge is 25% of $45,000, or $11,250, leaving $33,750.
- A$30,000
- B$33,750Correct
- C$31,250
- D$35,000
Explanation
Year 1 charge is 25% x 60,000 = $15,000, leaving $45,000. Year 2 charge is 25% x 45,000 = $11,250, leaving $33,750. A part-year charge for 20X1 is not applied because the policy gives a full year.
Did you get it right without looking?
One question tells you little. A timed set on Depreciation shows your real accuracy, how long you take and where you lose marks.
More Depreciation questions
- Which journal correctly records the annual depreciation charge for a non-current asset?
- Delta Co bought a building on 1 January 20X1 for $500,000 with a 50-year life and nil residual value, using the straight-line method. On 1 J…
- Which of the following is a required treatment under IAS 16 when the estimated useful life of an existing asset is revised?
- Under IAS 16, which statement about a company adopting the revaluation model for a class of property, plant and equipment is correct?
- Zeta Co buys a machine on 1 April 20X4 for $120,000, with an expected useful life of 5 years and a residual value of $12,000. Zeta Co uses t…
- Zeta Co buys equipment on 1 April 20X1 for $90,000 and depreciates it at 25% per year reducing balance, with a full year's charge in the yea…