Reference no: EM132917023
Question - On 1 April 20x1, ABC Co. bought a new lorry and made the following payments in relation to it:
Costs as per supplier's list $120,000
Less: Agreed discount 10,000 110,000
Delivery charge 1,000
Installation charge 4,000
Maintenance charge 4,000
Additional component to increase capacity 3,000
Spare parts 3,500
Total 125,500
Lorry is depreciated on the straight-line basis over a four-year life and the estimated residual value $38,000. ABC Co. prepare their accounts on 31 December each year, the company policy is to charge depreciation on a month for month basis. After exactly two years and three months, the lorry is out of order and sold for $23,000.
Required -
a) What amount should be used as the basis for depreciation of the lorry?
b) What is the depreciable amount of the lorry?
c) Calculate the depreciation on lorry for each of the years 20x1, 20x2 and 20x3.