If machine X cost #600,000 with anticipated life span of five years and estimated scrap value of #50,000, using straight line method; depreciation charged f...
If machine X cost #600,000 with anticipated life span of five years and estimated scrap value of #50,000, using straight line method; depreciation charged for two years will be
Answer Details
To calculate the depreciation charged for two years using the straight-line method, we need to know the following information:
1. The cost of the machine
2. The anticipated life span of the machine
3. The estimated scrap value of the machine
With this information, we can calculate the depreciation charged per year, and then multiply it by the number of years to get the total depreciation charged for two years.
Step 1: Calculate the annual depreciation
The straight-line method assumes that the asset depreciates by an equal amount each year over its useful life. To calculate the annual depreciation, we can use the following formula:
Annual depreciation = (Cost - Scrap value) / Useful life
In this case, the cost of the machine is #600,000, the estimated scrap value is #50,000, and the anticipated life span is five years. Therefore, the annual depreciation can be calculated as:
Annual depreciation = (#600,000 - #50,000) / 5 years
Annual depreciation = #110,000 per year
Step 2: Calculate the depreciation charged for two years
To calculate the depreciation charged for two years, we simply need to multiply the annual depreciation by the number of years:
Depreciation charged for two years = Annual depreciation x 2 years
Depreciation charged for two years = #110,000 x 2 years
Depreciation charged for two years = #220,000
Therefore, the depreciation charged for two years using the straight-line method is #220,000. The answer to the question is option (C).
Note that the depreciation charged in the third year and beyond would be the same as the second year, which is #110,000 per year, since the straight-line method assumes a constant depreciation charge over the useful life of the asset.