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rafapak


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accumulated depreciation- straight line
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Hi guys

I have problem to figure out how they arrived at this answer to this exercise I enclosed. We have depreciation at 2%. My thinking is that it is monthly charge. They probably started to depreciate on the 1st of January 20X5 and on 30th of June 20X5 they have accumulated depreciation of 12.000 ( 2000x6 months) so my thinking is that next year on 30th of June 20X6 which is 18 months after they started depreciating , accumulated depreciation should be 18 x 2000=36000 but this is wrong. Please, tell me how they arrived at the answer. 

 



-- Edited by rafapak on Saturday 29th of April 2017 01:09:44 AM

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abacus12345


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Hey

2% per year is £2000

Before this is added the depreciation, accumulated is £12,000

So this is the seventh year. Each year the expense has been £2000

Yr 1 2000
Acc Dep 2000

yr 2 dep 2000
Acc dep 4000

Yr3 dep 2000
Acc dep 6000

And so on

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abacus12345


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Accumulated is the running total of the depreciation charged each year on the asset.

The accumulated figure will sit in the balance sheet, it is this that comes off the purchase price of the asset, giving the carrying amount.

Now I've told you this I bet you're thinking 'damn, I know this' :)



-- Edited by abacus12345 on Saturday 29th of April 2017 12:11:40 AM

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rafapak


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thanks abacus for reply, you are right, they assume that 2% rate is annual charge. 



-- Edited by rafapak on Saturday 29th of April 2017 01:13:02 AM

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