Home › ACCA › Financial Accounting › Depreciation of Non-Current Assets › Equipment costing $27,000 with a $900 residual v…
Equipment costing $27,000 with a $900 residual value and a three-year life is purchased on 1 April 2012, with year-end at 31 December. What is the depreciation charge for the year ended 31 December 2012 (straight-line)?
A$8,700
B$2,175
C$6,525
D$6,750
Answer & Solution
Correct answer: C. $6,525
1. Full-year straight-line charge $= (\$27{,}000 - \$900) \div 3 = \$8{,}700$.
2. The asset is owned from 1 April to 31 December — 9 months.
3. Pro-rate: $\$8{,}700 \times 9/12 = \$6{,}525$.
4. Option A uses a full year; B uses only 3/12 (the final stub year); D forgets residual then pro-rates.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.5.2 "Partial-year straight-line depreciation", p.154_
Related questions
Which feature distinguishes the reducing-balance method from the straight-line method of dEquipment costs $27,000, residual $900, three-year life, acquired 1 April 2012 with a 31 DEquipment costs $27,000, residual $900, three-year life, acquired 1 January 2012. ReducingEquipment costs $27,000, residual $900, three-year life, bought 1 January 2012. Under reduEquipment costs $27,000, residual value $900, three-year life, acquired 1 January 2012. UsAn asset costs $27,000, has a residual value of $900 and an 8,700-hour life ($3.00 per houEquipment has a units-of-production rate of $3.00 per machine hour. It is used 2,100 hoursEquipment costs $27,000, has a residual value of $900 and an 8,700-hour useful life. What