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on jan 1,2016 abc Ltd acquired a equipmemt @ $250,000
The installation and setting-up period took 3months an additional 25,000 was spent on costs directly related to bringing the asset to its working condition.the equipment was ready for use on april 1,2016.
**what is the depreciation charge for the year ended 2016??sir,I think we should charge the depn from the earliest date rather than the equipment ready for use date..
please explain sir..
thanks in advance..You haven’t told me the estimated useful life if the asset so how is it possible for me to calculate the depreciation for the first 9 months
However, that’s not the difficulty that you are facing
The concept of depreciation is to match the cost of an asset to those periods for which the asset is contributing towards the generation of revenues and this asset only commenced contributing with effect from 1 April so the depreciation for this first year will be apportioned down to just 9 months (providing the year end / accounting date is 31 December – another vital bit of information that you also failed to tell me!)
OK?
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