Murray Limited records plant and equipment at depreciated historical cost and has traditionally charged depreciation on plant
Question:
Murray Limited records plant and equipment at depreciated historical cost and has traditionally charged depreciation on plant and equipment at a rate of 20% per annum using the reducing balance method. On 1 January 2017, following a review of depreciation methods by the directors, it was decided to charge depreciation at a rate of 20% per annum on a straight-line basis as it more accurately reflects the pattern of usage of plant and equipment. In addition, the directors have decided that from 1 January 2017 it would be more appropriate to include the depreciation charge on plant and equipment in cost of sales rather than administrative expenses as was previously the case.
Requirement Advise management on the appropriate accounting treatment.
Step by Step Answer:
International Financial Accounting And Reporting
ISBN: 9781912350025
6th Edition
Authors: Ciaran Connolly