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(Question 7.9 Bpp Revision Kit) A companys policy is to charge depreciation on a plant and machinery at 20% per year on cost, with proportional depreciation for items purchased or sold during a year.
The companys plant and machinery at cost account or the year ended 30 September 20×3 is shown below:
PLANT AND MACHINERY – COST
20×2
Oct 1 Balance $200,00020×3
Apr 1 Purcahse plant $50,000
_________
$250,000
_________20×3
30 Jun Transfer disposal account $40,000
30 Sep Balance $210,000
_________
$250,000
__________
What would be the depreciation charge for plant and machinery (excluding and profit or loss on the disposal) for the year ended 30 September 20×3?
A 43,000
B 51,000
C 42,000
D 45,000The answers A accoriding to the BPP kit, could you please explain why, it shows the working but not why we do those working?
ThankyouWe do the workings because the questions say that there is proportional depreciation. So on assets bought and sold during the year there is only depreciation for the months that they were owned.
Have you watched my free lectures on this? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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