Question

Graham manufactures and sells hiking and camping equipment. The business started trading on 1 January 2018 and purchased the following assets: Plant and machinery €80,000 Motor vehicles €24,000 Graham decides to depreciate plant and machinery on the straight-line basis, expecting it to have a useful life of five years and a residual value of €5,000 at the end of that time. Motor vehicles will be depreciated on the reducing-balance basis at the rate of 30% per annum.

1. What is the depreciation expense shown in the statement of profit or loss for the year ended 31 December 2018:

Depreciation expense: Plant and machinery? Motor vehicles? Total depreciation expense?

2. What is the total net book value of non-current assets in the statement of financial position as at 31 December 2018?

Answer 1

1		Depreciation Expense
	Plant and machinery	15,000
	Motor vehicles	7,200
2		Net book value
	Plant and machinery	65,000
	Motor vehicles	16,800
	Straight Line Method - Plant & Machinery
	Year	Book Value year start	Depreciation Life	Depreciation Exp.	Acc. Dep	Book Value year end
	2018	80,000	5	15,000	15,000	65,000
	Depreciation per year (80,000 - 5,000)/5 years = 15,000
	Reducing-balance Method - Motor vehicles
	Year	Book Value year start	Depreciation Rate	Depreciation Exp.	Acc. Dep	Book Value year end
	2018	24,000	30.00%	7,200	7,200	16,800