On a given day, two companies with the same accounting year end buy identical machinery for the same price. They both use the straight–line method of depreciation, but whilst Company X assumes the asset will have a 5-year useful life, Company Y assumes a 7-year life. Which of the following statements is true? a) For each company, the depreciation charge in the first Income Statement prepared will equal the asset’s depreciation provision in the Statement of Financial Position. b) The depreciation charge in the first Income Statement prepared will be the same for both companies. c) In the first year, the depreciation charged by Company
On a given day, two companies with the same accounting year end buy identical machinery for the same price. They both use the straight–line method of
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a) For each company, the depreciation charge in the first Income Statement prepared will equal the asset’s depreciation provision in the
Statement of Financial Position . -
b) The depreciation charge in the first Income Statement prepared will be the same for both companies.
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c) In the first year, the depreciation charged by Company X will be less than that charged by Company Y.
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d) The purchase of the asset will reduce total non-current assets in the Statements of Financial Position of both companies.
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