Question 1

Section A

An organic farm purchased a tractor for $60,000 on 1 July 20X1. It is depreciated at 20% per annum using the reducing balance method. What is the depreciation charge for the year ended 31 December 20X3? (Assume a full year's depreciation is charged in the year of acquisition).

Accepted Answer

Calculate depreciation year by year. Year 1 (20X1): 20% of $60,000. Subtract to find Carrying Amount (CA). Year 2 (20X2): 20% of new CA. Subtract. Year 3 (20X3): 20% of the latest CA.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating straight-line depreciation ($12,000 every year) or forgetting to subtract previous depreciation.

Section A

An organic farm purchased a tractor for $60,000 on 1 July 20X1. It is depreciated at 20% per annum using the reducing balance method. What is the depreciation charge for the year ended 31 December 20X3? (Assume a full year's depreciation is charged in the year of acquisition).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

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