Home › ACCA › Financial Accounting › Depreciation › Equipment costing $6,000 is depreciated at $100 …
Equipment costing $6,000 is depreciated at $100 per month. After 60 months it is fully depreciated but the business still owns and uses it. What happens next?
AA gain equal to the accumulated depreciation is recognised in profit
BDepreciation continues at $100 per month into negative book value
CThe equipment is written back up to its original $6,000 cost
DNo further depreciation is recorded and book value stays at zero
Answer & Solution
Correct answer: D. No further depreciation is recorded and book value stays at zero
1. After 60 months Accumulated Depreciation reaches $\$6{,}000$, equal to cost.
2. Book value $= 6{,}000 - 6{,}000 = 0$.
3. Once fully depreciated, no further depreciation entries are made however long it is owned, so D is correct.
4. B would over-depreciate; C and A invent revaluations or gains the text does not allow.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.3.1 "Fixed Assets—Deferred Expense", p.75_
Related questions
Equipment that cost $6,000 has Accumulated Depreciation of $300 after three months. What iWhich principle prevents a fixed asset's ledger account from being credited directly when Equipment costing $6,000 has a five-year useful life and is depreciated on a straight-lineWhy is the cost of a fixed asset such as equipment NOT recorded as an expense at the date