Accounting Online Program Certification Practice Test

What is the depreciation charge for Derek's 20X7 accounts?

1. £19,800

2. £21,000

3. £17,500

4. £15,000

The correct answer is: £19,800

To determine the depreciation charge for Derek's accounts in 20X7, it is important to consider the methods of depreciation that are commonly used in accounting, such as straight-line or declining balance methods. Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. The correct answer of £19,800 could stem from details such as the asset's cost, its useful life, and the depreciation method applied. For instance, if an asset was acquired for a significant amount with a useful life and residual value considered, calculating the annual depreciation would involve dividing the depreciable amount (cost minus residual value) by the useful life. In this scenario, the £19,800 could have been calculated based on the information that reflects the asset's value and its estimated decline over the year. By examining the depreciation formula and understanding the parameters of asset valuation, one can see why this particular figure denotes a reasonable charge for the asset over that accounting period. Understanding how the values were derived based on asset characteristics and the applicable depreciation method is key in financial reporting.