A manufacturer purchased a machine on 31 July 2014 for $44 500. The machine was

Question

A manufacturer purchased a machine on 31 July 2014 for $44 500. The machine was installed and commissioned for use on 30 September 2014. The manufacturer paid $950 for the installation costs. Reducing balance method of depreciation at 8% p.a. was used.
On 31 July 2016, the machine was traded in for $40 000 on a new machine costing $63 000. Straight line method at 20% p.a. was adopted for the new machine. Scrap value was $3000.
Using the above information, the depreciation for the original machine for the year ended 30 June 2015 would be:

Explanation / Answer

31 July 2014 Purchase of Machinery $44,500 31 September 2014 Installation charges       $950 Total cost of machinery $45,450 Depreciation will be calculated from 31 September 2014 as the machine was put to use Depreication under Reducing balance Method = Cost of Machinery X Depreciation rate Depreciation for the year ended 30 June 2015 = 45,450 X 8% X9/12 2,727

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