A sugar cane processing factory in Trinidad purchased equipment costing $120,000. The reducing balance method of depreciation is used at a rate of 20% per annum. What is the depreciation charge for Year 2?

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Question

A sugar cane processing factory in Trinidad purchased equipment costing $120,000. The reducing balance method of depreciation is used at a rate of 20% per annum. What is the depreciation charge for Year 2?

Accepted Answer

$19,200 — Award 1 mark for correct calculation: Year 1 depreciation = $120,000 × 20% = $24,000; Net book value at end of Year 1 = $96,000; Year 2 depreciation = $96,000 × 20% = $19,200. A is incorrect — this is Year 1 depreciation. C is incorrect — this does not follow the reducing balance method. D is incorrect — this is Year 3 depreciation.

Answer

$15,360

Answer

$24,000

Answer

$19,200

Answer

$20,000

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