Depreciation for part of a year
An asset bought part way through the year may get a full charge or only some months. Work out both policies.
Task 1Two policies4 questions
An asset bought part way through a year raises a question: how much depreciation in that first year? Each business sets a policy, and a question always says which one applies.
- Full year policy
- a full year's charge in the year the asset is bought, and none in the year it is sold
- Monthly policy
- a charge only for the months the asset is owned. It is also called pro rata or time apportioned
Ousegate Bakery's year ends on 31 December. On 1 October it buys a dough mixer for £4,800. The mixer is depreciated straight line over 4 years, with no residual value.
Task 2Part of a year with reducing balance2 questions
Task 3The second year and the year of sale3 questions