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Can you help me as I am confused with depreciation on the question of single entity of clarion as they have taken 85000* 20% as depreciation expense.
First thing how did they got 20%?
Second as per my knowledge you have to deduct accumulated depreciation of 19000 from 85000 carrying amount then you have to find depreciable amount
But in this question they didn’t took 19000
Pls help me if my knowledge of depreciation is wrong.Extract from the question:
“… should be charged to cost of sales on a straight line basis over a five year life …”
One fifth is 20% … so that’s where the 20% comes from
Straight line basis means that the depreciation expense is exactly the same for each of the five years
You are confusing it with a reducing balance basis
If you are at all unsure on this, I strongly recommend that you watch John Moffat’s lectures on depreciation in the F3 suite of lectures
OK?
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