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Could you tell me how do you solve this kind of questions?why we charge cash and disposals?
A company’s plant and machinery ledger account for the year ended 30 September 20X2 was as follows:
PLANT AND MACHINERY – COST
$ $
20X1 20X2
1 Oct Balance 381,200 1 Jun Disposal account – cost of
asset sold 36,000
1 Dec Cash – addition 18,000 30 Sep Balance 363,200
399,200 399,200
The company’s policy is to charge depreciation at 20% per year on the straight line basis, with proportionate depreciation in years of purchase and disposal.
What is the depreciation charge for the year ended 30 September 20X2?
A $74,440
B $84,040
C $72,640
D $76,840We don’t charge cash!! We charge depreciation on a monthly basis on whatever the cost of the assets is.
From 1 October to 30 November (2 months), the cost of the assets was 381,200 and so the depreciation for that period is 2/12 x 20% x 381,200.
On 1 December we bought more for 18,000, to the total cost becomes 399,200.
They stay at this level until 31 May (6 months) and so the depreciation for this period is 6/12 x 20% x 399,200.On 1 June we sold assets with a cost of 36,000, so the total cost falls to 363,200.
It stays at this level until 30 September (4 months), and so the depreciation for this period is 4/12 x 20% x 363,200.Add the three figures together and you have the total depreciation for the year.
this will be helpful in finding solution to these type of questions.thanks a lot again.
Evans co purchased a machine with an estimated useful life of 10 years for $76000 on 30 September 2005. The machine had a residual value of $16000.
What are the ledger entries to record the depreciation charge for the machine in the year ended 30 September 2008?
sir I got confused as I got $6000 was the yearly charge and $18000 for the three years. But my textbook shows: debit deprecation charge$6000 and credit accumulated depreciation$6000. Instead of $18000 as the total of the three years. ThanksAlthough the total is 18,000, the entry is 6,000 in each year separately and your question only asks for the one year (year to 30 September 2008).
We do not use (Assets Cost-N.B.V.)/Life.
It is (original cost less residual value) / expected useful life.
My answer to the original post remains as it was before 🙂
(and do watch 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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