Question

On 31st August 2018, Musk Traders purchased a machine on credit for a cost price of R402 500 (including VAt at 15 percent). Machinery is depreciated over six years according to the straight line basis and there is no residual value on this machine as it is highly specialised. Musk Traders has a 30 June year-end.

Calculate the depreciation and accumulated depreciation for 2019 and 2020

Answer 1

The depreciated asset price has to be independent of VAT;

= 402,500/1.15

= $350,000

Annual Depreciation = 350,000/6 years

= $58,333

Musk Trading has a 30 June year end so;

2019

September to June = 10 months

Depreciation;

= 58,333 * 11/12

= $48,611

Accumulated Depreciation = $48,611

2020

Depreciation = Annual depreciation of $58,333

Accumulated depreciation

= 2019 depreciation + 2020 depreciation

= 48,611 + 58,333

= $‭106,944‬