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Hallo,
I’m solving an example about forming an I/S from a Trial balance.
A manufacturing account is included.
When coming to the Production overhead and depreciation, we have the following:
Motor vehicles
cost 124
depreciation 0.2 p.a.disposal of a motor vehicle
cost 24
depr. 10
NBV = 14
Sales price 13
= Loss on disposal 1Then, in the Production overhead I see:
Depreciation on motor vehicle = 0.2 x (124 – 24) = 20
Depreciation on loss of disposal of motor vehicle = 0.2 x 1 = 0.2My Q: Why do we have to calculate depreciation on the loss of disposal?
Thank you!
Hallo,
I think I got the example wrong, it’s not about depreciation on the loss of disposal, but it’s about appropriation of the amount of loss on disposal between the three – production, selling and administration costs, then the 0.2 is the appropriation percentage, but because it was the same amount (0.2) as the depreciation, I thought it was depreciation.
Thank you!
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