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A machine which was bought for $180,000 on 30 April 2008. The residual value was $5,000 and depreciation rate was 25%. Depreciation is to be charged under the reducing balance method on month to month basis. Compute the depreciation at 31st December 2008
- a)$30,000
- b)$19,000
- c)$18,000
- d)$15,000
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
A machine which was bought for $180,000 on 30 April 2008. The residual...
Given:
- Purchase price of the machine: $180,000
- Residual value: $5,000
- Depreciation rate: 25% per annum
- Method: Reducing balance method
- Purchase date: 30 April 2008
- Depreciation period: From 30 April 2008 to 31 December 2008 (8 months)
Step 1: Calculate annual depreciation
Depreciation for a year using the reducing balance method = Cost of asset × Depreciation rate
Annual depreciation = $180,000 × 25% = $45,000
Step 2: Calculate depreciation for 8 months
Since depreciation is calculated month-to-month, we only need to calculate depreciation for 8 months (from 30 April 2008 to 31 December 2008).
Depreciation for 8 months = 8/12 of annual depreciation
Depreciation for 8 months = 8/12 of annual depreciation
Step 3: Reducing balance at 31 December 2008
The depreciation expense for the period from 30 April 2008 to 31 December 2008 is $30,000.
Thus, the depreciation at 31 December 2008 is $30,000.
Most Upvoted Answer
A machine which was bought for $180,000 on 30 April 2008. The residual...
In reducing bal method salvage value ignored . now 180000*8/12 * 25 = 30000
machine purchased for 8 months
machine purchased for 8 months
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A machine which was bought for $180,000 on 30 April 2008. The residual...
Given:
Cost of machine = $180,000
Residual value = $5,000
Depreciation rate = 25%
Depreciation method = Reducing balance method
To find:
Depreciation at 31st December 2008
Solution:
First, we need to calculate the depreciation rate per month.
Depreciation rate per year = 25%
Depreciation rate per month = 25%/12 = 2.08%
Depreciation for the first month (May 2008):
Depreciation = (Cost of machine - Residual value) x Depreciation rate per month
Depreciation = ($180,000 - $5,000) x 2.08%
Depreciation = $3,655.20
Net book value at the end of May 2008:
Net book value = Cost of machine - Depreciation for May
Net book value = $180,000 - $3,655.20
Net book value = $176,344.80
Depreciation for the second month (June 2008):
Depreciation = (Net book value at the end of May - Residual value) x Depreciation rate per month
Depreciation = ($176,344.80 - $5,000) x 2.08%
Depreciation = $3,663.14
Net book value at the end of June 2008:
Net book value = Net book value at the end of May - Depreciation for June
Net book value = $176,344.80 - $3,663.14
Net book value = $172,681.66
Similarly, we can calculate the depreciation and net book value for each month from July to December.
Depreciation for July 2008 = $3,671.12
Net book value at the end of July 2008 = $169,010.54
Depreciation for August 2008 = $3,679.13
Net book value at the end of August 2008 = $165,331.41
Depreciation for September 2008 = $3,687.15
Net book value at the end of September 2008 = $161,644.56
Depreciation for October 2008 = $3,695.18
Net book value at the end of October 2008 = $157,949.36
Depreciation for November 2008 = $3,703.22
Net book value at the end of November 2008 = $154,245.94
Depreciation for December 2008 = $3,711.27
Net book value at the end of December 2008 = $150,534.94
Therefore, the depreciation at 31st December 2008 is $3,711.27.
Cost of machine = $180,000
Residual value = $5,000
Depreciation rate = 25%
Depreciation method = Reducing balance method
To find:
Depreciation at 31st December 2008
Solution:
First, we need to calculate the depreciation rate per month.
Depreciation rate per year = 25%
Depreciation rate per month = 25%/12 = 2.08%
Depreciation for the first month (May 2008):
Depreciation = (Cost of machine - Residual value) x Depreciation rate per month
Depreciation = ($180,000 - $5,000) x 2.08%
Depreciation = $3,655.20
Net book value at the end of May 2008:
Net book value = Cost of machine - Depreciation for May
Net book value = $180,000 - $3,655.20
Net book value = $176,344.80
Depreciation for the second month (June 2008):
Depreciation = (Net book value at the end of May - Residual value) x Depreciation rate per month
Depreciation = ($176,344.80 - $5,000) x 2.08%
Depreciation = $3,663.14
Net book value at the end of June 2008:
Net book value = Net book value at the end of May - Depreciation for June
Net book value = $176,344.80 - $3,663.14
Net book value = $172,681.66
Similarly, we can calculate the depreciation and net book value for each month from July to December.
Depreciation for July 2008 = $3,671.12
Net book value at the end of July 2008 = $169,010.54
Depreciation for August 2008 = $3,679.13
Net book value at the end of August 2008 = $165,331.41
Depreciation for September 2008 = $3,687.15
Net book value at the end of September 2008 = $161,644.56
Depreciation for October 2008 = $3,695.18
Net book value at the end of October 2008 = $157,949.36
Depreciation for November 2008 = $3,703.22
Net book value at the end of November 2008 = $154,245.94
Depreciation for December 2008 = $3,711.27
Net book value at the end of December 2008 = $150,534.94
Therefore, the depreciation at 31st December 2008 is $3,711.27.
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A machine which was bought for $180,000 on 30 April 2008. The residual value was $5,000 and depreciation rate was 25%. Depreciation is to be charged under the reducing balance method on month to month basis. Compute the depreciation at 31st December 2008a)$30,000b)$19,000c)$18,000d)$15,000Correct answer is option 'A'. Can you explain this answer?
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A machine which was bought for $180,000 on 30 April 2008. The residual value was $5,000 and depreciation rate was 25%. Depreciation is to be charged under the reducing balance method on month to month basis. Compute the depreciation at 31st December 2008a)$30,000b)$19,000c)$18,000d)$15,000Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A machine which was bought for $180,000 on 30 April 2008. The residual value was $5,000 and depreciation rate was 25%. Depreciation is to be charged under the reducing balance method on month to month basis. Compute the depreciation at 31st December 2008a)$30,000b)$19,000c)$18,000d)$15,000Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A machine which was bought for $180,000 on 30 April 2008. The residual value was $5,000 and depreciation rate was 25%. Depreciation is to be charged under the reducing balance method on month to month basis. Compute the depreciation at 31st December 2008a)$30,000b)$19,000c)$18,000d)$15,000Correct answer is option 'A'. Can you explain this answer?.
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