- This topic has 1 reply, 2 voices, and was last updated 2 years ago by
.
- Posts
I found this question and attempted it
Tareq purchases an industrial freezer unit for $14,000 on 1 August 20X4. The reducing-balance rate of depreciation is 35%. What is the pro rata depreciation charge in the first year? Again, calculate the two steps needed to find this.
I calculated the pro rata depreciation, the way it was explained in the text,
~ The depreciation charge for a full-year X Number of months assets owned / 12
– Here is my problem, the number of months assets owned, I said it was 5
so my working was 4900 X 5/12 = 2042But apparently, the textbook is marking me wrong with no explanation on the answer sheet
Working on the textbook, was
4900 X 11/12 = 4492So Sir, help me understand where the 11 months are coming from, when the asset was purchased on 1 August.
It depends on when the company’s year end is, and you have not stated it in your question.
Your workings assume that the year end is 31 December, and if that is the case then what you have done is correct. However I can only assume that the question states there to be a different year end for the company (as is very commonly the case).
- You must be logged in to reply to this topic.