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On 1 July 2020 Tom bought a machine for P15, 500. He depreciates machinery at a rate of 20% per annum on the reducing balance

On 1 July 2020 Tom bought a machine for P15, 500. He depreciates machinery at a rate of 20% per annum on the reducing balance basis. A full year’s depreciation is charged in the year an asset is purchased. His year end is 31 October.

 Required

a. Calculate the depreciation charge on the machine for the year to 31 October 2022. 

 b. Identify three reasons why an asset may be depreciated.

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