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Could you explain please?
On 1 January 20X4 Joffa purchased a new machine at a cost of $96,720. Delivery
costs were $3,660 and internal administration costs of $9,450 were incurred. At that
time Joffa planned to replace the machine in 5 years, when it would have no value,
and to depreciate the machine on straight line basis.Joffa decides on 1January 20X6 that the machine only has one remaining year of useful life. There is no expected change to the residual value at the end of its life.
What is depreciation expense in respect of this machine for the year ended 31 December 20X6?
A) $33,460
B) $58,032
C) $60,228
D) $65,898Please do not simply set test questions and expect an answer. You must have an answer in the same book in which you found the question and so you should ask about whatever it is in the answer that you are not clear about – then I will help you.
Until 31 December X5, the depreciation is (96720 + 3660)/5 = 20,076 per year.
Therefore the carrying value as at December X5 = (96720 + 3660) – (2 x 20076) = 60,228.
As at 1 Jan X6 they decide there is only 1 year remaining, so the depreciation for X6 will be 60,228/1 = 60,228.
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