ACCA FM · Chapter 7 · Question 5 of 10
A company buys a machine for $80,000. Tax-allowable depreciation is available at 25% a year on a reducing balance basis. What is the tax-allowable depreciation for year 3 (to the nearest $)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $11,250
Explanation
Year 1: 80,000 x 25% = $20,000, leaving 60,000. Year 2: 60,000 x 25% = $15,000, leaving 45,000. Year 3: 45,000 x 25% = $11,250 (exact). A straight-line approach of 25% of cost each year would give $20,000.
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