Oscar's business invests in a new lorry on 13 September20X3 at a cost of £42 350.On the same date he disposes of the old lorry for £4000.The estimated useful life of the new lorry is five years, with an expected residual value of £6500.Oscar charges a full year's depreciation in the year of acquisition and none in the year of disposal. What is Oscar's depreciation charge in respect of the lorry for the financial year ended 31 January 20X4?
A)£6370
B)£8970
C)£7170
D)£2390

Question

Quizplus · Accepted Answer

The depreciation charge for the first year would be (($42,350 - £6,500)/5) x 1= £7,870. Since the lorry was acquired on 13 September, 20X3, the financial year ended 31 January, 20X4 would cover a period of 4 months (September 13 to January 31). Therefore, the depreciation charge for the year would be (4/12) x £7,870 = £2,623.33.

Oscar's Business Invests in a New Lorry on 13 September20X3