Using the prime cost method, calculate the depreciation deduction for a depreciating asset purchased 55 days into
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Question:
Using the prime cost method, calculate the depreciation deduction for a depreciating asset purchased 55 days into the financial year. The asset was purchased for $150,000 and has an economic life of three years.
Show your workings.
Hint
- Calculate the annual depreciation expense: Cost of asset / Economic life
- Prorate the depreciation expense based on the ownership period: Number of days remaining in year after asset was purchased / Total days in a year
- Calculate the depreciation deduction: Annual depreciation expense X Ownership period
Related Book For
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
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