Answer to Question #126553 in Accounting for Tania Duvenhage

Question

Balances at 1 April 2019

R

Equipment: Cost

28 000

Accumulated depreciation: Equipment

(26 133)

Additional information

At the beginning of the financial year, 1 April 2019, Namgoong Plastics replaced its plastic shredding equipment with new glass recycling equipment that had a purchase price of R45 600. The replaced plastic shredding machine was sold for R5 000 cash, it was the only piece of equipment in the books of Namgoong prior to the purchase of the new glass recycling equipment. Depreciation is provided at 20% p.a. on the straight-line method.

The depreciation on the glass recycling equipment for the year ended 31 March 2020 amounted to:

Answer 1

Answer:

Depreciation charge = R9 120

Explanation

Straight line method of depreciation calculates annual depreciation as a percentage of the cost of Asset.

Depreciation = Cost × rate of depreciation.

Cost of glass recycling equipment = R45 600

Number of months in use in the 2019/2020 accounting year = 12 months = 1 year

Rate of depreciation = 20%

Thus,

Depreciation = Cost × Rate of depreciation

= R45 600 × 20% × 1

= R45 600 × 0.20

= R9 120