Answered: Calculate the depreciation expense…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On 1 January 2019, Metsi Limited purchased a plant for R1 500 000 cash. The plant was immediately available for use. It was determined that the plant needs to be dismantled at an estimated cost of R250 000 at the end of its useful life of five years. Assume all criteria for the recognition of the dismantling provision has been met and that it is not used to produce inventories. A fair discount rate of 10% per annum (pre-tax) is applicable. The plant has no residual value and Metsi Limited uses the straight-line method to calculate depreciation.

Calculate the depreciation expense recognised in the current financial year ending 31 December 2019.

	a.	R350 000
	b.	R300 000
	c.	R331 046
	d.	R335 318

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