# Depreciation Example 3

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1. says

Kindly help with this question

On 1 October 2013 a machine was bought for \$25,000. The depreciation policy for this class of
asset is 20% WDV (written down value). What are the amounts for depreciation expense in
respect of this machine for the year ended 31 December 2013, 31 December 2014 & 31 December 2015 ?

A- \$5,000 for each year
B- 2013: \$1,250, 2014: \$4,750, 2015: \$4,300
C- 2013: \$5,000, 2014: \$4,000, 2015: \$3,200
D- 2013: \$1,250, 2014: \$5,000, 2015: \$4,000

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The ‘trick’ here is that the question does not say whether to time apportion the depreciation, or to have a full years charge in the year of purchase.

If we were to time apportion, then:

In the first year, the depreciation will be 20% x 25000 apportioned for 3 months (Oct to Dec), so x 3/12. This gives a figure of \$1250.

In the second year it will be a full 20% of the carrying value, so 20% x (25000 – 1250) = 4750.

You should be able now to calculate the third year yourself. However, this does not come to one of the four choices.

So…..it must be a full years charge in the year of purchase.
This means that in the first year it is 20% x 25000 = 5,000.
In the second year it will be 20% x (25000 – 5000) = 4000
You can now calculate the third year yourself and you will find that it is one of the four choices

2. says

Good Afternoon, why do we balance the Accumulated Depreciation a/c from the 2nd year? (That’s @ the 8mins 27secs point) How come we don’t balance for.the 1st yr (1400)? Thanks!!

3. says

Respected sir.
Sir my google chrome does not work properly because shock waves player, plug in becomes crash, when i start my lecture,it has been disturbing me for last 4 days.
what i do.
thamks
sohail

4. says

very good explanation, but if we create a separate account for each car, then it will increase the number of accounts in the balance sheet and if one account for all car and the same for accumulated depreciation, then we will not have the the price of each car for each year.

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@M. Osman Kamran, But we don’t need ‘the price of each car for each year’.

We only have one car account. Many companies keep an asset register with details of each individual asset, but this is nothing to do with the double entry.

5. says

I wonder if anyone can recoommend any accounting calculations practices book for F2 abd F3, please

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@diamond10, me too. I try to find any accounting calculations practices book for F3 too. If you found, pls kindly share or recommend me…. Thxs!

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