Ahmed Ltd purchase second hand photo copy machine from Suzan plc for SAR 7000 on 1st
July 2022,
the Accountant Directorate Manager expect to use it for 3 years and looking forward to
sale it for SAR 1500 after maturity date.
Instruction
• Apply reduced balance method
• Calculate depreciation rate
• Include 5 decimal points.
• Shows the way calculate depreciation
Required
What is Depreciation for 2023, 2024 and 2025
Solution
Ahmed Ltd
Year Cost of Asset Depreciation rate Depreciation Accumulate depreciation
7,000.0 2,811.1 2,811.1
2023 0 0.40159 4 4
4,188.8 1,682.2 4,493.3
2024 6 0.40159 1 5
2,506.6 1,006.6 5,500.0
2025 5 0.40159 5 0
Notes:
1) 0.40159 = ((1-(1500/7000)^(1/3))
2) 2,811.14064 =(7,000 * 0.40159)
3) 4,188.85936 = (7000 - 2811.14064)
4) 4,493.351903 = (2,811.14064 + 1,682.21040)
5) Total Depreciation + Residual value = Cost of Assets (5,500 + 1,500 = 7,000)
1
ABC Company purchased machinery on June 14, 2022, for $80,000. The machinery is estimated to have
a salvage value of $8,000 after a useful life of 8 years and the company sold machine on February 11
2025.
Instruction:
a) Compute depreciation expense on the machine from purchased date to date of sold.
b) Apply Straight-line the methods.
Solution
Days Month Dpn Accumulate Dep
14 Jun 22 to 30 Jun 22 17 373.055556 373.0555556
01 Jul 22 to 31 Dec 22 6 3950 4323.055556
01 Jan 23 to 31 Dec 23 12 7900 12223.05556
01 Jan 24 to 31 Dec 24 12 7900 20123.05556
01 Jan 25 to 31 Jan 25 1 658.333333 20781.38889
01 Feb 25 to 10 Feb 25 10 235.119048 21016.50794
Total Depreciation 21,016.51
Extra Details
$88,0
Cost of Machinery 00
Economic life 8 years
$8,00
Residual value 0
Method 1 = C - R / N
Dpn per year (80000-8000)/8 = 7900
9000/ 658.33
Dpn per month 12 = 33
0
14-
Date of purchase Jun-22
Sold 11-
date Feb-25
