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company purchases 40000 worth assets with life of 6 years and salvage 10000 on jan. it was disposed on dec at 15000. the depreciation is charged at SLM on pro rata basis. what is the value of the depreciation over the life of the asset?
Will they charge the depreciation to the SOPL at the year and what is the amount of depreciation to be charged?
I don’t know where you found this question, but the wording is awful. We do not refer to the ‘value’ of the depreciation, but the ‘amount’ of the depreciations.
Also, as you have typed it, there is no mention of the years – they bought it in January of which year and sold it in December of which year.For however many years they owned it, the depreciation expense each year is
(40,000 – 10,000) / 6 = 5,000 p.a..When they sell if then there will be a profit or loss on sale depending on how many years they had kept it for.
All of this is explained in my free lectures. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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