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The plant and equipment account in the records of a company for the year ended 31 December 20X6 is shown below
plant & equip
20X6 $ (Dr)
1 jan balance 960000
1 jul cash 4800020X6 $ (Cr)
30 sep trans to disposal 84000
31 dec balance 924000
——– ———
1008000 1008000
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The company’s policy is to charge depreciation on the straight line basis at 20% per year, with proportionate depreciation in the years of purchase and sale.What should be the charge for depreciation in the company’s statement of profit or loss for the year ended 31 December 20X6?
$184,800
$192,600
$191,400
$184,200Please do not simply type out a full question and expect to be provided with a full answer. You must have an answer in the same book in which you found the question (I obviously assume that you are using a Revision Kit from one of the ACCA Approved Publishers) and so in future ask about whatever it is in the answer that you are not clear about and then I will explain 🙂
For the period 1 January to 1 July (6 months) the cost was $960,000 and so the depreciation for this period is 6/12 x 20% x $960,000 = $96,000.
On 1 July they buy more at a cost of $48,000 and so the cost goes up to $1,008,000. The depreciation for the period 1 July to 30 September (3 months) is therefore 3/12 x 20% x $1,000,800 = $50,400
On 30 September they sell plant which had a cost of $84,000 and so the total cost goes down to $924,000. The depreciation for the period 30 September to 31 December (3 months) is therefore 3/12 x 20% x $924,000 = $46,200.The total depreciation charge for the year is therefore the total of the three calculations.
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