ICAEW AF · Chapter 11 · Question 11 of 13
At 1 January, a company's plant and machinery had a cost of £240,000, none of which was fully depreciated. On 1 April it sold plant that had cost £30,000, and on 1 October it bought new plant costing £48,000. Plant is depreciated at 10% per year straight line on cost, pro rata for each month of ownership. The year end is 31 December. What is the depreciation charge for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) £22,950
Explanation
Plant held all year: (£240,000 - £30,000) x 10% = £21,000. Plant sold on 1 April, 3 months: £30,000 x 10% x 3/12 = £750. Plant bought on 1 October, 3 months: £48,000 x 10% x 3/12 = £1,200. Total = £22,950.
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