Question 1

A transport company purchases a delivery truck on 1 April 20X1 for $80,000. It has an estimated useful life of 5 years and a residual value of $10,000. The company uses the straight-line method of depreciation and charges depreciation on a pro-rata basis. The financial year ends on 31 December. What is the depreciation charge for the year ended 31 December 20X1? (Enter numbers only)

Accepted Answer

Calculate annual depreciation: (Cost - Residual Value) / Useful Life. Then pro-rate for the number of months owned in the year (April to December).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to deduct the residual value, or calculating for a full year instead of 9 months.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 4

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