Anyone know how to work this out?

Abbie28
Abbie28 Registered Posts: 42 Regular contributor ⭐
During the year some equipment was part exchanged.

The original equipment was brought for £1200.
Two years depreciation has been applied.
Depreciation is on reducing basis at 35%.
A part exchange allowance of £300 was given.
£1000 was paid from the bank for the new equipment.

Calculate the accumilated depreciatiopn on the old equipment that was part exchange during the year?

How do i work this out?

Comments

  • Abbie28
    Abbie28 Registered Posts: 42 Regular contributor ⭐
    i dont know if the answer i 693 or 870?
  • sunshine2010
    sunshine2010 Registered Posts: 45 Regular contributor ⭐
    i got 693

    You take 35% of £1200 - which is £420
    Then you take the £420 away from the £1200 which leaves - £780
    Then 35% of 780 which is £273

    Add the first year depreciation of £420 and the second years of £273 and you get - £693

    Please correct me if i am wrong anyone.

    Thanks
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    Abbie28 wrote: »
    During the year some equipment was part exchanged.

    The original equipment was brought for £1200.
    Two years depreciation has been applied.
    Depreciation is on reducing basis at 35%.
    A part exchange allowance of £300 was given.
    £1000 was paid from the bank for the new equipment.

    Calculate the accumilated depreciatiopn on the old equipment that was part exchange during the year?

    How do i work this out?

    The px is a red herring and doesn't affect the depreciation. You need this info to do the disposals account (which I expect is the next step in this question).

    Cost 1200

    Depn year 1 = 1200 * 35% = 420

    Depn year 2 1200-420= 780.
    780 *35% = 273

    total depn for 2 years = 420+273 = 693
  • jenny3549
    jenny3549 Registered Posts: 472 Dedicated contributor 🦉
    The question has asked for the accumulated depreciation so:

    Original Cost of Equipment 1200
    Yr 1 Depreciation (35%) (420)
    NBV at end Yr 1 780
    Yr 2 Depreciation (35% of 780) (273)
    NBV at end Yr 2 507

    Therefore the accumulated depreciation is the charge in Yr 1 (420) plus the charge in Yr 2 (273) making a total of 693.

    Hope that makes sense!


    Edit: Whoops - looks like we all answered at once!
  • Abbie28
    Abbie28 Registered Posts: 42 Regular contributor ⭐
    Thank you!!! really helpfull!
  • Abbie28
    Abbie28 Registered Posts: 42 Regular contributor ⭐
    Do you know where i could get tips on Appropriation Accounts i suck at them big time...

    I reallyappreciated that thank for your time im so happy now i finally understand it.
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