Question

Tucker Ltd purchases an equipment for $300,000 on 1 July 2015 and depreciates the asset over 15 years. The estimated residual value is $30,000. On 30 June 2018, the management of Tucker Ltd assesses the equipment as having a recoverable amount of $200,000. What should be the depreciation expense recorded by Tucker Ltd on 30 June 2019 assuming the original estimated useful life and residual value remain the same?

       
a) $14,167

       
b) $16,667

       
c) $13,333

       
d) $11,333

Answer 1

Year	Opening Value	Depreciation	Closing value
30th June 2016	300000	18000	282000
30th June 2017	282000	18000	264000

Depreciation Calculation (2016&2017)
Depreciation =	Purchase price - Residual Value/Number of years of usseful life
Depreciation =	(300000-30000)/15 = 18000

Depreciation expense on 30th June 2018
Opening Book Value	264000
Recoverabe Amount	200000
Depreciation expense on 30th June 2018	64000

Depreciation expense on 30th June 2019
Opening Value	200000
Remaining useful life	12 years
Residual Value	30000
Depreciation expense on 30th June 2019	(200000-30000)/12 = 14,167

Option A is the Correct Answer.