Reference no: EM131385790
(a) Identify the four factors which cause non-current assets to depreciate.
(b) Which one of these factors is the most important for each of the following assets?
(i) a gold mine;
(ii) a van;
(iii) a fifty-year lease on a building;
(iv) land;
(v) a ship used to ferry passengers and vehicles across a river following the building of a bridge across the river;
(vi) a franchise to market a new computer software package in a certain country.
(c) The financial year of Ochre Ltd will end on 31 December 2015. At 1 January 2015 the company had in use equipment with a total accumulated cost of £135,620 which had been depreciated by a total of £81,374. During the year ended 31 December 2015 Ochre Ltd purchased new equipment costing £47,800 and sold off equipment which had originally cost £36,000, and which had been depreciated by £28,224, for £5,700.
No further purchases or sales of equipment are planned for December. The policy of the company is to depreciate equipment at 40% using the diminishing balance method. A full year's depreciation is provided for on all equipment in use by the company at the end of each year.
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