Sarah Limited owns motor vehicles with a cost of £60,000 and an estimated residual value of £10,000. At 30 November 2019, £20,000 of depreciation had been provided on these motor vehicles. Sarah Limited also owns plant and machinery with a cost of £100,000 and an estimated residual value of £5,000. Plant and machinery accumulated depreciation at 30 November 2019 was £35,000. Sarah Limited depreciates motor vehicles at 20% per annum on the straight line basis while plant and machinery is depreciated on the reducing balance basis at the rate of 25% per annum. What will the total depreciation charge on these assets be for the year ended 30 November 2020?

Question

Quizplus · Accepted Answer

The total depreciation charge on these assets for the year ended 30 November 2020 will be £26,250. This is calculated as follows:Motor vehicles:Depreciation for the year = (Cost - Residual value) x Depreciation rate= (£60,000 - £10,000) x 20%= £50,000 x 20%= £10,000Plant and machinery:Depreciation for the year = (Carrying value at the beginning of the year - Residual value) x Depreciation rate= (£100,000 - £35,000 - £5,000) x 25%= £60,000 x 25%= £15,000Total depreciation charge = £10,000 + £15,000= £25,000

Sarah Limited Owns Motor Vehicles with a Cost of £60,000