A company’s policy is to charge depreciation on plant and machinery @20% per year on cost, with proportional depreciation for items purchased during the year and no depreciation on items sold. The company’s Plant and machinery at cost account for the year ended 30 Sept 2019 is as below: Plant and Machinery 2018 £ 2019 01-Oct balance 200,000 30-Jun Disposal 40,000 2019 01-Apr Bank 50,000 30-Sep 210,000 250,000 250,000 Required: Calculate the depreciation charge for the plant and machinery for the year ended 30 September 2019 a. £50,000 b. £37,000 c. £42,000 d. £40,000
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 company’s policy is to charge
|
|
Plant and Machinery |
|
|
|||
|
2018 |
£ |
|
2019 |
|||
|
01-Oct |
balance |
200,000 |
|
30-Jun |
Disposal |
40,000 |
|
|
||||||
|
2019 |
|
|||||
|
01-Apr |
Bank |
50,000 |
|
30-Sep |
210,000 |
|
|
250,000 |
250,000 |
Required: Calculate the depreciation charge for the plant and machinery for the year ended 30 September 2019
| a. |
£50,000 |
|
| b. |
£37,000 |
|
| c. |
£42,000 |
|
| d. |
£40,000 |
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