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BOLTD’s policy is to depreciate plant and machinery at 15% per annum on cost. On 1 January 2016, a new machine was acquired for $7 million and correctly included in the cost of plant and machinery. Depreciation on plant and machinery should be presented in cost of sales.
The Trial Balance of the Cost of Plant and equipment on 30 June 2016 is 76,900
Is it only add (76,900 x 15%)=11535 to the cost of sales? is there anything
should change in SFP?Probably not … but I can’t be definitive because you haven’t indicated whether depreciation is pro-ratad for assets acquired during the year
IF pro-rata applies then we need to deal with the depreciation on the new asset separately from the depreciation on the brought forward figure
Brought forward cost would be 69,900,000 and the addition of 7,000,000 takes the total cost figure to 76,900,000
Depreciation on the 69,900,000 will be at 15% = 10,485,000 and
depreciation on the 7,000,000 will be time apportioned for 6 months =
7,000,000 * 15% * 6/12 = 525,000
If there’s no indication of time apportionment in the question (unlikely that there’s no such indication!) then your proposal is ok
OK?
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