Bookkeeping Study week Q&A - Q15 Diminishing depreciation
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blk71
Registered Posts: 4
Hi
Question 15 on the AAT Adv Bookkeeping study help this week asked this question:
Deborah has purchased a state of the art food mixer for her business. Cost £2100 excluding vat.
After 5 years - residual value £300
Depreciation will be on diminishing balance basis @ 20% per annum.
What will the depreciation charge be for third year and the accumulated depreciation at the end of that year?
My answer: Depreciation charge for that year £230.40 / Accumulated Depreciation £878.40
The correct answer AAT have highlighted; Depreciation charge for that year £268.80 / Accumulated Depreciation £1024.80
***********
I cannot work out how I've have got this so wrong. Please can someone explain how the AAT answer is correct?
MUUUUCHHH appreciated.
Question 15 on the AAT Adv Bookkeeping study help this week asked this question:
Deborah has purchased a state of the art food mixer for her business. Cost £2100 excluding vat.
After 5 years - residual value £300
Depreciation will be on diminishing balance basis @ 20% per annum.
What will the depreciation charge be for third year and the accumulated depreciation at the end of that year?
My answer: Depreciation charge for that year £230.40 / Accumulated Depreciation £878.40
The correct answer AAT have highlighted; Depreciation charge for that year £268.80 / Accumulated Depreciation £1024.80
***********
I cannot work out how I've have got this so wrong. Please can someone explain how the AAT answer is correct?
MUUUUCHHH appreciated.
0
Comments
-
Hi blk71,
It appears you have fallen for the red herring. If you are going to depreciate using a diminishing balance basis you can ignore the residual value (a diminishing balance will always have a residual balance). The correct calculation will be:
Year 1 Depreciation Charge £420.00 Accumulated £420.00
Year 2 Depreciation Charge £336.00 Accumulated £756.00
Year 3 Depreciation Charge £268.80 Accumulated £1,024.80
0
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