Depreciation charge
sscors
Registered Posts: 72 Epic contributor 🐘
Hi
does anyone understand why the depreciation charge is 1500
Question
A new vehicle has been acquired VAT can be reclaimed on this vehicle
The cost of excluding VAT was 7500 this was paid from the bank
The residual value is expected to be 1500 excl VAT
The depreciation policy for vehicle is 25% per annum on a straight line basis
Deprec has already been entered for existing vehicles
Make entries for
a)purchase of new vehicle
b) deprecia on new vehicle
According to my calcs deprec is 1875 but the answer says depreciation is 1500? Not sure what to do with residual value
does anyone understand why the depreciation charge is 1500
Question
A new vehicle has been acquired VAT can be reclaimed on this vehicle
The cost of excluding VAT was 7500 this was paid from the bank
The residual value is expected to be 1500 excl VAT
The depreciation policy for vehicle is 25% per annum on a straight line basis
Deprec has already been entered for existing vehicles
Make entries for
a)purchase of new vehicle
b) deprecia on new vehicle
According to my calcs deprec is 1875 but the answer says depreciation is 1500? Not sure what to do with residual value
0
Comments

The cost of Vehicle minus the residual value x 25%
7500  1500 x 25% = 1500
On straight line method you always take any residual value away from the cost before calculating the depreciation.
Hope this helps
Jan0 
Sorry I still don't understand. I looked up staight line method and the formula for calc deprec was (costresidual value)/useful economic life. I'm not quite sure about your working out?0

Hia
its 75001500=6000 (price  residual value)
6000 x25%=1500(times by the depreciation)
therefore depreciation is £1500
does this help explain?Nicola Donnelly ,MAAT, MIP, CIMA Dip MA
Email: donnellynicola7@gmail.com
Facbook Page: MEND Accounting
Blog: http://wannabeanaccountant.blogspot.co.uk
Twitter: @mendaccounting
Website: http://www.mendaccounting.co.uk0 
That is correct if you are given the life, so if it says you keep the item for 4 yrs you would divide the cost  residual value by 4 to find yearly depreciation, but in this case it gave you a %
75001500 = 6000
6000/4 = 1500
or
7500  1500 x 25% = 1500
It is just they word the questions differently
Jan0 
Yeah thanks I get it now0
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