The plant and equipment account in the records of a company for the year ended 31 December 20X6 is shown below. PLANT AND EQUIPMENT - COST 20X6 $ 20X6 $ 1 Jan Balance 960,000 1 July Cash 48,000 30 Sept Transfer disposal account 84,000 31 Dec Balance 924,000 1,008,000 1,008,000 The company's policy is to charge depreciation on the straight line basis at 20% per year, with proportionate depreciation in the years of purchase and sale. What should be the charge for depreciation in the company's statement of profit or loss for the year ended 31 December 20X6? A $184,800 B $192,600 C $191,400 D $184,200
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.
The plant and equipment account in the records of a company for the year ended 31 December 20X6 is
shown below.
PLANT AND EQUIPMENT - COST
20X6 $ 20X6 $
1 Jan Balance 960,000
1 July Cash 48,000 30 Sept Transfer disposal account 84,000
31 Dec Balance 924,000
1,008,000 1,008,000
The company's policy is to charge
proportionate depreciation in the years of purchase and sale.
What should be the charge for depreciation in the company's statement of profit or loss for the year
ended 31 December 20X6?
A $184,800
B $192,600
C $191,400
D $184,200
Step by step
Solved in 2 steps with 1 images
