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Equipment costs $27,000, residual $900, three-year life, acquired 1 April 2012 with a 31 December year-end. Under reducing balance at 2/3, what is the depreciation charge for the year ended 31 December 2012?
A$18,000
B$13,500
C$6,525
D$4,500
Answer & Solution
Correct answer: B. $13,500
1. Full-year reducing-balance charge $= \$27{,}000 \times 2/3 = \$18{,}000$.
2. The asset is owned 1 April to 31 December — 9 months.
3. Pro-rate: $\$18{,}000 \times 9/12 = \$13{,}500$.
4. Option A uses a full year; C is the partial-year straight-line figure; D pro-rates an incorrect base.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.5.2 "Partial-year declining balance depreciation", p.157_
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