A motor vehicle, which had a carrying amount at the end of the financial year 2011/12 of $18 000, was disposed of on 1 November 2012. Depreciation was calculated on the vehicle at 20% per annum using the diminishing-balance method. What was the depreciation expense charged for the first 4 months of the financial year 2012/13, before the asset was sold?
A) $18 000
B) $0
C) $3600
D) $1200

Question

Quizplus · Accepted Answer

Using the diminishing-balance method, we can calculate the annual depreciation rate as: 20/100 = 0.2
The depreciation per full year would be: $18,000 x 0.2 = $3,600
Since the vehicle was sold on 1 November 2012, the first 4 months of the financial year would be from 1 July 2012 to 31 October 2012. This period is equivalent to 4/12 = 1/3 of a full year.
Therefore, the depreciation expense for the first 4 months of the financial year 2012/13 would be: $3,600 x 1/3 = $1,200
The correct answer is D, $1,200.

A Motor Vehicle, Which Had a Carrying Amount at the End