Answer to Question #137394 in Accounting for Jon

Question

On 31 August, M traders purchased a machine on credit for a cost price of R402 500 (including VAT at 15%). Machine is depreciated over 6 years according to the straight-line method and there is residual value on this machine. M traders has a 30 June year end. Calculate depreciation and accumulated depreciation for 2019 and 2020

Answer 1

Cost of machine without VAT:

$\frac{402,500}{1.15}=350,000$

The depreciation per month:

$\frac{350,000}{6*12}=4861.11$

The accumulated depreciation for 2019:

$4861.11*10=48,611.1$

The accumulated depreciation for 2020:

$4861.11*22=106,944.42$