Depreciation

sphinx

I'm struggling to know how many years you are supposed to calculate for depreciation when the date of purchase of the asset has been given in the question. In December 06 paper Task 2.3(e) where it says the asset was purchased during the year ended 30 September 2003, why do they charge depreciation for 3 years (03, 04 and 05) and in June 06 paper Task 1.4 depreciation has been charged for only 2 years - 2004 and 2005 not 2003.

Any help in explaining this would be much appreciated!

Andypandy

They normally let you know in the question what the company depreciation policy is( Seems to be full depreciation in the year of purchase & none in the year of disposal in most of the past papers.)

sphinx

Both questions state 'a full years depreciation is made in the year of acquisition and none in the year of disposal' that's why i don't understand why depreciation was calculated for 3 years in December paper (including 2003) and only 2 years (2004 and 2005) in June paper when the asset was also purchased in 2003.

Vidya_r

In the Dec 06 paper:

Financial year end is Sep 2006

so for the equipment purchased during the year end 30 sep 2003 depreciation will be caculated for the accounting year 02-03 , 03- 04, 04-05
tht is for 3 years as no depre is to b cal for the year of disposal.

In the June06 paper:

Financial year end is 31 March 2006

so for equipment bought in SAep 03 depreciation will be cal for accounting year 03-04, 04-05 tht is for 2 years as no depre is to b cal for the year of disposal....

hope tht helps..

mikes

Generally assests are depreciated at different rates and lengths of time, according to how long the company expects it to last or use it for. You will not need to know the length of time. The exam will just ask you to calculate for 2/3 years for speed and to see if you know the difference between the two methods. That's all you need to deal with.