Molly buys a new cash till on 1 July 20X4 for £1872.She does not expect it to have any residual value in four years' time, at which point she plans to replace it.She depreciates such assets on the straight-line basis, charging depreciation for each full month of ownership.What is the carrying amount of the till at Molly's year end on 31 October 20X5?

Question

Quizplus · Accepted Answer

First, we need to calculate the annual depreciation expense:
Depreciation per year = (Cost - Residual value) / Useful life in years
Depreciation per year = (1872 - 0) / 4 = £468

Since the depreciation is charged for each full month of ownership, the monthly depreciation expense would be:
Monthly depreciation expense = Depreciation per year / 12 = 468 / 12 = £39

To calculate the carrying amount on 31 October 20X5, we need to first calculate the number of months the till has been owned:
Months owned = 4 (from July 20X4 to June 20X5) + 4 (from July 20X5 to October 20X5) = 8 months

Carrying amount on 31 October 20X5 = Cost - Accumulated depreciation
Accumulated depreciation = Monthly depreciation expense x Months owned
Accumulated depreciation = 39 x 8 = £312
Carrying amount on 31 October 20X5 = 1872 - 312 = £1560

Therefore, the answer is D (£1248 is not a possible choice and the other choices are very far off from the actual value)

Molly Buys a New Cash Till on 1 July 20X4