ICAEW AF · Chapter 11 · Question 3 of 13
A company buys a vehicle on 1 April for £45,000. It has an estimated residual value of £5,000 and a useful life of 8 years. Depreciation is charged on a straight-line basis, pro rata for each month of ownership. The year end is 31 December. What is the depreciation charge for the year of purchase?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £3,750
Explanation
Annual depreciation = (cost £45,000 - residual value £5,000) / 8 years = £5,000. The vehicle is owned for 9 months (April to December). Charge = £5,000 x 9/12 = £3,750.
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