Equipment which had a carrying amount at the end of the financial year 2018/19 of $18 000, was disposed of on 1 October 2019. Depreciation was calculated on the equipment at 20% per annum using the diminishing-balance method. What was the depreciation expense charged for the first 3 months of the financial year 2019/20, before the asset was sold?

Question

Quizplus · Accepted Answer

Using the diminishing-balance method at 20% per annum, the annual depreciation expense for the equipment would be 20% of $18,000, which equals $3,600. Since the equipment was disposed of after 3 months in the financial year 2019/20, the depreciation expense for these 3 months would be one-quarter of the annual expense: $3,600 / 4 = $900.

Equipment Which Had a Carrying Amount at the End of the Financial