A business buys a machine for £120,000 on 1 January 1993 and another one on 1 July 1993 for £144,000. Depreciation is charged at 10% per annum on cost, and calculated on a monthly basis. What is the total depreciation charge for the two machines for the year ended 31 December 1993? A £13,200 B £19,200 C £21,600 D £26,400
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A business buys a machine for £120,000 on 1 January 1993 and another one on 1 July
1993 for £144,000.
on a monthly basis. What is the total depreciation charge for the two machines for the
year ended 31 December 1993?
A £13,200
B £19,200
C £21,600
D £26,400
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