POA - Depreciation Rate

[Turn over 1 Secondary 4 Principles of Accounts Syllabus 7086 and 7087 Topic: Non Current Assets – Depreciation This document consists of 4 printed pages. Question 1 REQUIRED Xiao Hu Pte Ltd is a new business that produces and sells tiger-themed cupcakes. As of 1 January 2023, the business’s total costs for its machinery amounted to $40 000. Xiao Hu Pte Ltd Accumulated Depreciation of Machinery account Date Particulars Dr Cr Bal 2023 Dec 31 Depreciation of Machinery 8000 8000 Cr 2024 Dec 31 Depreciation of Machinery 6400 14 400 Cr

2 a) What method of depreciation is Xiao Hu Pte Ltd using to depreciate its Machinery? __________________________________________________________ b) Calculate the rate of depreciation per annum. __________________________________________________________ __________________________________________________________ Guided solutions a) Xiao Hu Pte Ltd Accumulated Depreciation of Machinery account Date Particulars Dr Cr Bal 2023 Dec 31 Depreciation of Machinery 8000 8000 Cr 2024 Dec 31 Depreciation of Machinery 6400 14 400 Cr Look at the depreciation amount. It is decreasing, thus – reducing balance method. Straight line method should have the same depreciation expense yearly.

[Turn over 3 b) Calculate the rate of depreciation per annum. Xiao Hu Pte Ltd is a new business that produces and sells tiger-themed cupcakes. As of 1 January 2023, the business’s total costs for its machinery amounted to $40 000. Xiao Hu Pte Ltd Accumulated Depreciation of Machinery account Date Particulars Dr Cr Bal 2023 Dec 31 Depreciation of Machinery 8000 8000 Cr 2024 Dec 31 Depreciation of Machinery 6400 14 400 Cr Referring to answer for a), we apply the formula for reducing balance method of depreciation: [Cost – Accumulated Depreciation] x rate. Refer to the depreciation of machinery for the year ended 2023. [Cost – Accumulated Depreciation] x rate = depreciation expense. Accumulated Depreciation is ZERO. This is evident upon referring to the Bal in the ledger. The depreciation expense for the year ended 2023, $8000, adds up to the total ($8000) which means there is no amount accumulated from the previous years. (Possibly, a newly purchased NCA)

4 Now, substitute all the amounts into the formula. [40 000 – 0] x rate = 8000 rate = 8000/[40000 – 0] = 0.2 Therefore, we can conclude that Xiao Hu Pte Ltd charges a depreciation rate of 20% per annum on machinery. To check if your answer is correct, substitute it into the equation. [40 000 – 0] x 0.2 = 8000 ✓ This document serves as an additional guide to prepare you for your GCE NA/O-Level POA examinations. However, it should not replace your textbook/notes. The business mentioned in this paper is entirely fictitious. This document is free to distribute. This document was written by Pan Yijie. Any queries should be forwarded to the author