ACCA Applied Knowledge · Financial Accounting · Depreciation
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 the straight-line method and charges depreciation on a time-apportioned basis. Its year end is 31 December. What is the depreciation charge for the year ended 31 December 20X4?
The charge is $16,200. Depreciable amount is $108,000 (cost less residual value), giving $21,600 per year over five years. The machine was owned for nine months of the year, so the charge is time-apportioned to 9/12 of the annual amount.
- A$16,200Correct
- B$21,600
- C$18,000
- D$24,000
Explanation
Annual depreciation = (120,000 - 12,000)/5 = $21,600. Nine months of ownership: 21,600 x 9/12 = $16,200. $21,600 ignores time apportionment; $18,000 ignores the residual value for a part-year (120,000/5 x 9/12); $24,000 is a full year ignoring residual value.
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