CIMA BA3 · Chapter 10 · Question 3 of 10
A company with a 31 December year end buys a machine for $20,000 on 1 April 20X3. Depreciation is charged at 10% a year on a straight-line basis, pro rata on a monthly basis. What is the depreciation charge for 20X3?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $1,500
Explanation
Annual depreciation = $20,000 x 10% = $2,000. The machine is held for nine months (April to December), so the charge = $2,000 x 9/12 = $1,500.
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