Question

Calculate the amount of depreciation for;

Warehouse Fixtures and Fittings depreciation is based on 15 years usage and the straight line method (residual value $6 000) , the cost was $42,000, Accumulated depreciation is $15,000

The old Delivery Truck sold on 30 June is depreciated at 20% using the diminishing balance method (residual $8 000), the cost was $65,000, Accumulated depreciation is $47,000.

The new Delivery Truck bought on 30 June is to be depreciated at 25% using the diminishing balance method (residual $10,000), the cost was $74000.

Answer 1

1. Calculation of depreciation on furniture and fittings:

Depreciation=   Cost of furniture and fittings- Residual value

Life of furnitue and fittings ( in yrs)

= $ 42000- $6000

15

= $ 2400/-

2 Calculation of depreciation on old delivery truck:

Depreciation= Opening WDV x Rate of depreciation x No. of months used/ 12months

= 18000 ( WN 1) x 20% x 6/12

= $ 1800

3 Calculation of depreciation on new delivery truck:

Depreciation= Opening WDV x Rate of depreciation x No. of months used/ 12months

= 74000 x 25% x 6/12

= $ 9250

Total depreciation= $ 2400+ $ 1800+ $ 9250

= $ 13450

Working notes:

1. Depreciation as per diminishing balance method is calculated on opening written down value which is calculated as  follows:

Opening WDV =Total cost- Accumulated depreciation

= $ 65000- $ 47000

= $ 18000

2. While calculating depreciation as per diminishing balance method salvage value is ignored as it is always calculated by appling fixed percentage on opening WDV.

Assumptions:

1. It is assumed that books of accounts are closed on 31st December every year.