On 31 August 2018, Musk Traders purchased a machine on credit for a cost price of R402 500 (including VAT at 15%). Machinery is depreciated over six years according to the straight‐line basis and there is no residual value on this machine, as it is highly specialised. Musk Traders has a 30 June year‐end. Required: Calculate the depreciation and accumulated depreciation for 2019 and 2020. Round to the nearest Rand
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On 31 August 2018, Musk Traders purchased a machine on credit for a cost price of R402 500
(including VAT at 15%). Machinery is
and there is no residual value on this machine, as it is highly specialised. Musk Traders has a
30 June year‐end.
Required:
Calculate the depreciation and
Round to the nearest Rand. Show all your workings
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