Question

Please assist with the attached question

CAAT Traders acquired machinery on 1 July 2018 for an amount of R175 300. This machinery was only available for use from 1 September 2018 due to massive testings that needed to be performed first. CAAT Traders' current financial period ends on 31 May 2019. According to CAAT Traders' accounting policy, depreciation on machinery is provided using the unit of production method over it's the useful life of 5 years according to the following production schedule: Year 1 Year 2 Year 3 Year 4 Year 5 Expected unit of production 15 000 13 000 11 000 10 500 10 500 Actual units produced 9 000 N/A N/A N/A N/A The amount for depreciation expenses to be shown in the statement of profit or loss and other comprehensive income for the year ended 31 May 2019 will be ...? (round off your final answer to the nearest Rand) A. R35 060 B. R21 193 . C. R105 180 D. R19 721 E. R26 295

Answer 1

Cost of machine = R175,300

	Year 1	Year 2	Year 3	Year 4	Year 5	Total units of production
Expected units of production	15,000	13,000	11,000	10,500	10,500	60,000

Depreciation expense per unit = Cost of machine/Expected units of production

= 175,300/60,000

= 2.92166667 per unit

Depreciation expense for year 1 = Actual units produced in year 1 x Depreciation expense per unit

= 9,000 x 2.92166667

= R26,295

The amount for depreciation expense to be shown in the statement of profit or loss and other comprehensive income for the year ended 31 May 2019 will be R26,295.

Correct option is E.

Kindly comment if you need further assistance.

Thanks‼!