Assume ABC spare parts PLC uses the Tax year Hamle 1 to sene 30 and has the following plant assets : computers , information system , software and data storage Date of purchase and Acquisition yekatit 10 , 2006 16,000 Ginbot 01 , 2006 6,000 Nehase 07 , 2006 7,000 Tahsas 19 , 2007 3,500 Instruction : compute DB and DE for tax year Ending sene 30 , 2006 and 2008 assuming that ABC spare parts PLC . Sold computer at Birr 3,000 on Megabit 23 , 2006.
To compute DB (depreciation base) and DE (depreciation expense) for tax year ending sene 30, 2006 and 2008, we need to calculate the accumulated depreciation for each year.
For tax year ending sene 30, 2006:
DB: Total cost of plant assets purchased before sene 30, 2006
= 16,000 + 6,000 + 7,000
= 29,000
DE: Accumulated Depreciation on plant assets purchased before sene 30, 2006
= (DB / Useful Life) x (Number of months in service / 12 months)
= (29,000 / 5 years) x (12 months / 12 months)
= 5,800
For tax year ending sene 30, 2008:
DB: Total cost of plant assets purchased before sene 30, 2008
= 29,000 + 3,500
= 32,500
DE: Accumulated Depreciation on plant assets purchased before sene 30, 2008
= (DB / Useful Life) x (Number of months in service / 12 months)
= (32,500 / 5 years) x (12 months / 12 months)
= 6,500
So, for tax year ending sene 30, 2006, the DB is 29,000 and the DE is 5,800.
For tax year ending sene 30, 2008, the DB is 32,500 and the DE is 6,500.
To compute the Depreciation Expense (DE) and Depreciation Base (DB) for the tax years ending sene 30, 2006 and 2008, we need to calculate the depreciation for each asset.
Step 1: Calculate the useful life of each asset:
1. Computers: Assume a useful life of 5 years.
2. Information System: Assume a useful life of 4 years.
3. Software: Assume a useful life of 3 years.
4. Data Storage: Assume a useful life of 3 years.
Step 2: Calculate the depreciation for each asset:
1. Computers:
- Date of purchase and acquisition: yekatit 10, 2006
- Cost: 16,000
- Useful Life: 5 years
- Depreciation per year: 16,000 / 5 = 3,200
- Depreciation for tax year ending sene 30, 2006: (25/30) * 3,200 = 2,667 (since the asset was acquired during the year)
- Depreciation for tax year ending sene 30, 2008: 3,200
2. Information System:
- Date of purchase and acquisition: ginbot 01, 2006
- Cost: 6,000
- Useful Life: 4 years
- Depreciation per year: 6,000 / 4 = 1,500
- Depreciation for tax year ending sene 30, 2006: (25/30) * 1,500 = 1,250 (since the asset was acquired during the year)
- Depreciation for tax year ending sene 30, 2008: 1,500
3. Software:
- Date of purchase and acquisition: nehase 07, 2006
- Cost: 7,000
- Useful Life: 3 years
- Depreciation per year: 7,000 / 3 = 2,333
- Depreciation for tax year ending sene 30, 2006: (25/30) * 2,333 = 1,944 (since the asset was acquired during the year)
- Depreciation for tax year ending sene 30, 2008: 2,333
4. Data Storage:
- Date of purchase and acquisition: tahsas 19, 2007
- Cost: 3,500
- Useful Life: 3 years
- Depreciation per year: 3,500 / 3 = 1,167
- Depreciation for tax year ending sene 30, 2006: 0 (since the asset was acquired after the tax year)
- Depreciation for tax year ending sene 30, 2008: 1,167
Step 3: Calculate the accumulated depreciation:
1. Accumulated Depreciation for tax year ending sene 30, 2006:
- Computers: 2,667
- Information System: 1,250
- Software: 1,944
- Data Storage: 0 (since the asset was acquired after the tax year)
- Total accumulated depreciation: 2,667 + 1,250 + 1,944 + 0 = 5,861
2. Accumulated Depreciation for tax year ending sene 30, 2008:
- Computers: 3,200
- Information System: 1,500
- Software: 2,333
- Data Storage: 1,167
- Total accumulated depreciation: 3,200 + 1,500 + 2,333 + 1,167 = 8,200
Please note that the sale of the computer on Megabit 23, 2006, will affect the accumulated depreciation in subsequent years but does not affect the depreciation for the tax year ending sene 30, 2006.