30th September 20X1, the following balances existed in the records of Lam: Plant and equipment - cost: $860,000 Accumulated depreciation: $397,000 During the year ended 30th September 20X2, plant with a written down value of $37,000 was sold for $49,000. The plant had originally cost $80,000. Plant purchased during the year cost $180,000. It is the company’s policy to charge a full year’s depreciation in the year of acquisition of an asset and none in the year of sale, using a rate of 10% on the straight line basis. What net amount should appear in Lam’s statement of financial position at 30th September 20X2 for plant and equipment? a) $563,000 b) $467,000 c) $510,000 d) $606,000
30th September 20X1, the following balances existed in the records of Lam: Plant and equipment - cost: $860,000 Accumulated depreciation: $397,000 During the year ended 30th September 20X2, plant with a written down value of $37,000 was sold for $49,000. The plant had originally cost $80,000. Plant purchased during the year cost $180,000. It is the company’s policy to charge a full year’s depreciation in the year of acquisition of an asset and none in the year of sale, using a rate of 10% on the straight line basis. What net amount should appear in Lam’s statement of financial position at 30th September 20X2 for plant and equipment? a) $563,000 b) $467,000 c) $510,000 d) $606,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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At 30th September 20X1, the following balances existed in the records of Lam:
Plant and equipment - cost: $860,000
During the year ended 30th September 20X2, plant with a written down value of $37,000 was sold for $49,000. The plant had originally cost $80,000. Plant purchased
during the year cost $180,000. It is the company’s policy to charge a full year’s depreciation in the year of acquisition of an asset and none in the year of sale, using a rate of 10% on the straight line basis.
What net amount should appear in Lam’s statement of financial position at 30th September 20X2 for plant and equipment?
a) $563,000
b) $467,000
c) $510,000
d) $606,000
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