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"On 1 Jan 20X1 Fleet Ltd. bought a non-current asset for £225,000 which had an estimated useful life of 20 years and a residual value of £25,000. Assets are depreciated on a straight line basis. Fleet's year end is 31 December. On 1 January 20X4 the asset's total useful life is revised to 15 years in total with no residual value.

What is the total deprecation charge in 20X4?"

User Wdg
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Final answer:

The total depreciation charge for Fleet Ltd. in 20X4 for the non-current asset after revising the useful life to 15 years with no residual value is £16,250.

Step-by-step explanation:

To calculate the total depreciation charge for Fleet Ltd. in 20X4 for the non-current asset, we must first determine the depreciation charge before the revision in useful life. As of 1 Jan 20X1, the asset was initially valued at £225,000 with a residual value of £25,000 and a useful life of 20 years. This gives us an annual depreciation charge calculated as (£225,000 - £25,000)/20 = £10,000 per year.

By 1 Jan 20X4, the asset has been depreciated for 3 years, so the accumulated depreciation is 3 * £10,000 = £30,000. The book value of the asset at the beginning of 20X4 is therefore £225,000 - £30,000 = £195,000.

Given the revised estimate on 1 Jan 20X4, the asset will now have a remaining useful life of 12 years (15 total years - 3 years already depreciated) with no residual value. Therefore, the new annual depreciation expense is the book value at the start of 20X4 divided by the revised remaining useful life: £195,000 / 12 = £16,250.

In summary, the total depreciation charge for the asset in 20X4 after the revision will be £16,250.

User Chuky Pedro
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