23 The plant and machinery account (at cost) of a business for the year ended 31

Question

23 The plant and machinery account (at cost) of a business for the year ended 31 December 20X5 was as follows Plant and machinery - cost 20X5 1 Jan Balance byf 30 Jun Cash purchase of plant 240,000 160,000 20X5 31 Mar Transfer to disposal account 31 Dec Balance c/f 60,000 340,000 400,000 400,000 The company's policy is to charge depreciation at 20% per year on the straight line basis, with proportionate depreciation in the years of purchase and disposal What should be the depreciation charge for the year ended 31 December 20X5? A $68,000 B $64,000 C $61,000 D $55,000

Explanation / Answer

Answer: Option - D ($55,000)

Depreciation Month Basis for depreciation Calculations Amount in $ Jan to Mar Opening balance $240,000*20%*3/12 12000 Apr to june (opening balance - Machinery sold on march 31 ($240,000-60,000)*20%*3/12 9000 Jul to december Balance on 31st march+ machinery purchased on 30 june ($240,000-$60,000+$160,000)*20%*6/12 34000 Total depreciation charge for the period 55000

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