Maintenance charge 4,000 An additional component to increase capacity 3,000 Spare parts 3,500 Total 125,500 The lorry is depreciated on a straight-line basis over a four-year life and the estimated residual value $38,000. ABC Co. prepares their accounts on 31 December each year, the company policy is to charge depreciation on a month for month basis. After exactly two years and three months, the lorry is out of order and sold for $23,000. a) What amount should be used as the basis for depreciation of the lorry? b) What is the depreciable amount of the lorry? c) Calculate the depreciation on lorry for each of the years 20x1, 20x2, and 20x3.
1.
On 1 April 20x1, ABC Co. bought a new lorry and made the following payments in relation to it:
Costs as per supplier’s list $120,000
Less: Agreed discount 10,000 110,000
Delivery charge 1,000
Installation charge 4,000
Maintenance charge 4,000
An additional component to increase capacity 3,000
Spare parts 3,500
Total 125,500
The lorry is
a) What amount should be used as the basis for depreciation of the lorry?
b) What is the depreciable amount of the lorry?
c) Calculate the depreciation on lorry for each of the years 20x1, 20x2, and 20x3.
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