The plant and machinery at cost account of a business for the year ended 30 June 20X4 was as follows: PLANT AND MACHINERY – COST $ $ 20X3 20X3 1 Jul Balance 240,000 30 Sep Transfer disposal account 60,000 20X4 20X4 1 Jan Cash – purchase of plant 160,000 30 Jun Balance 340,000 400,000 400,000 The company's policy is to charge depreciation at 20% per year on the reducing balance basis, with proportionate depreciation in the years of purchase and disposal. What should be the depreciation charge for the year ended 30 June 20X4? A $68,000 B $64,000 C $61,000 D $55,000
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.
The plant and machinery at cost account of a business for the year ended 30 June 20X4 was as follows:
PLANT AND MACHINERY – COST
$ $
20X3 20X3
1 Jul Balance 240,000 30 Sep Transfer disposal account 60,000
20X4 20X4
1 Jan Cash – purchase of plant 160,000 30 Jun Balance 340,000
400,000 400,000
The company's policy is to charge
proportionate depreciation in the years of purchase and disposal.
What should be the depreciation charge for the year ended 30 June 20X4?
A $68,000
B $64,000
C $61,000
D $55,000
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