The plant and machinery at cost account of a business for the year ended 30 June 20X4 was as follows:
PLANT AND MACHINERY -COST
| 20X3 1 JUL | Balance | 1,200,000 | 20X3 30 SEP | Transfer disposal account | 300,000 |
| 20X4 1 JAN | Cash -purchase of plant | 400,000 | 20X4 30 JUN | Balance | 1,300,000 |
| 1,600,000 | 1,600,000 |
The company's policy is to charge depreciation at 20% per year on the straight line basis, with proportionate depreciation in the years of purchase and disposal.
What would be the depreciation charge for the year ended 30 June 20X4?
Suggested solutions:
| DATE | COST | RATE | PERIOD | AMOUNT |
| 1 JUL 20X3 | 1,200,000 | 0.2 | 3/12 | 60,000 |
| 30 SEP 20X3 | (300,000) | |||
| 30 SEP 20X3 | 900,000 | 0.2 | 3/12 | 45,000 |
| 1 JAN 20X4 | 400,000 | |||
| 1 JAN 20X4 | 1,300,000 | 0.2 | 6/12 | 130,000 |
| Depreciation charge | 235,000 |