Question

At 31 July 20X6, Helios International had non-current assets which had cost $310,000. At the same date, the accumulated depreciation on the assets was $120,000. The company had not disposed of any non-current assets during the year to 31 July 20X7, but acquired an asset at a cost of $79,200 on 1 January 20X7. Helios International depreciates non-current assets at a rate of 25% per annum. What is the company’s depreciation charge for the year to 31 July 20X7 using:

a. The straight line method

b. The reducing balance method Assume that depreciation is charged from the first year of acquisition.

Answer 1

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Helios International
Straight Line Method	Amount $	Note
Original cost as on 31 July 20X7	310,000.00	A
Depreciation rate	25%	B
Depreciation amount	77,500.00	C=A*B
Asset purchased on 1st Jan 20X7	79,200.00	D
Depreciation rate	25%	See B
Annual Depreciation amount	19,800.00	E=D*B
Period till 31 July 20X7 (Months)	7.00	F
Depreciation amount	11,550.00	G=E/12*F
Depreciation under straight line method	89,050.00	H=C+G
Helios International
Reducing Balance Method	Amount $
Original cost as on 31 July 20X7	310,000.00	See A
Accumulated Depreciation	120,000.00	I
Book Value as on 31 July 20X7	190,000.00	J=A-I
Depreciation rate	25%	See C
Depreciation amount	47,500.00	K=J*C
Asset purchased on 1st Jan 20X7	79,200.00	See D
Depreciation rate	25%	See B
Annual Depreciation amount	19,800.00	See E
Period till 31 July 20X7 (Months)	7.00	See F
Depreciation amount	11,550.00	See G
Depreciation under Reducing Balance Method	59,050.00	L=K+G