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On 31 Oct 2013, a business had machines with a cost $120,000 with accumulated depreciation of $25,000
On 1 Jan 2014, the sold a machine for $10,000. This machine had originally cost $30,000 on 1 April 2012. The business had a depreciation policy of charging Straight-line at rate 20% per annum, on a monthly basis.
What is the depreciation expense for the year end on 31 Oct 2014?From 1 November 2013 up to 31 Dec 2013, which is 2 month, the cost was 120,000. So the depreciation is 2/12 x 20% x 120,000 = 4,000
On 1 Jan the cost fell to 90,000 (120000 – 30000).
It stayed at 90,000 from 1 Jan 2014 until 31 Oct 2014. So the depreciation is 10/12 x 20% x 90,000 = 15,000So the total depreciation = 4,000 + 15,000 = 19,000
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