At 31st July 20X6, Apollon International had non current assets which had cost $310000. At the same date, the accumulated depreciation on the assets was $120,000. The company had not disposed of any non current assets during the year to 31 July 20X7 but acquired an asset at a cost of $79200 on 1st January 20X7.
Depreciation is at a rate of 25% per annum. Charged from the first year of acquisition with a full year's charge.
We are required to compute the company's depreciation charge for the year to 31 July 20X7 using:
The Straight Line Method
Reducing Balance Method
The Straight Line method.
25/100 × 310000= 77500. Depreciation for first year.
25÷100×(310000+79200)= 156700. Acquired new asset, Add to original cost of non current assets.
Total Depreciation= 156,700 + 77,500= 234,200.
Reducing Balance Method.
25÷100×310000)=77500. 310000-77500=232500.
25÷100×(310000+79200)= 156700. 389200-156700= 232500.
232500+232500=465000.
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Depreciation.
5y ago#1Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers. They have answers and explanations.
Your answer is not correct.
With straight line depreciation, the charge/expense for the year ended 31 July 20X7 is:
25% x (310,000 + 79,200) = $97,300.
With reducing balance it is 25% x (310,000 - 120,000 + 79,200) = $67,300.
I do suggest that you watch my free lectures on depreciation. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thank you for the explanation. I'll do as advised.
I have watched the lectures, why do we not subtract the AD from cost to give NBV using the straight line method? I still don't get it, confusing!
5y ago#4Straight line depreciation is calculate on the original cost (less any expected scrap proceeds).
Reducing balance depreciation is calculated on the net book value (i.e. cost less accumulated depreciation).
I think it would be worth you watching the lectures on this again.
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