Question

a firm acquired an assset on 1st Apri, 1990 at a cost of Le 30,000. The useful life of the asset is expected to be 10 years. The estimated scrap value of the asset at the end of the year is Le 2,000. Show the provision for depreciation account for the first 3 years in the life of the asset using the Straight line method​

Answer 1

December 31 1990 : Le 2100

December 31 1991 : Le 2800

December 31 1992 : Le 2800

Step-by-step explanation:

Given the following :

Cost of equipment = 30,000

Number of Useful years = 10

scrap value = 2,000

depreciation account for the first 3 years in the life of the asset using the Straight line method :

Straight line Depreciation formula :

[ (Cost - scrap value ) / number of useful years]

YEAR 1:

Equipment was purchased on April 1st, that is only 9 of the 12 months will be used to calculate Depreciation in the first year.

December 31, 1990:

[ (30,000 - 2000) / 10 ] × (9/12)

2800 × 0.75 = Le 2100

December 31, 1991 :

[ (30,000 - 2000) / 10 ] × (12/12)

2800 × 1 = Le 2800

December 31, 1992:

[ (30,000 - 2000) / 10 ] × (12/12)

2800 × 1 = Le 2800