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Math  /  Numbers & Operations

QuestionCobra Limited, a manufacturing company commenced business on 1st November 2020 and prepares accounts to 31st December each year. He purchased the following assets in the year 2020:Generator GHC180,000, Refrigerator GHC9,000, Laptops GHC12,000, Office Building GHC1,500,000, Toyota Corolla GHC55,000, Fittings & fixtures GHC60,000. It was also found out that the trademark of his company was valued to be GHC50,000 with an estimated useful life of 10 years. What is the written down value for trademark in the 2020 year of assessment? OA GHC49,164 OB. GHC52,242 OC.GHC5,000 OD. GHC49,589

Studdy Solution

STEP 1

1. The trademark is valued at GHC50,000.
2. The trademark has an estimated useful life of 10 years.
3. The written down value is calculated using straight-line depreciation.
4. The company commenced business on 1st November 2020, so depreciation for 2020 will be for 2 months (November and December).

STEP 2

1. Determine the annual depreciation.
2. Calculate the depreciation for 2020.
3. Compute the written down value for the trademark at the end of 2020.

STEP 3

Calculate the annual depreciation using the straight-line method.
Annual Depreciation=Cost of TrademarkUseful Life\text{Annual Depreciation} = \frac{\text{Cost of Trademark}}{\text{Useful Life}} Annual Depreciation=GHC50,00010=GHC5,000\text{Annual Depreciation} = \frac{GHC50,000}{10} = GHC5,000

STEP 4

Calculate the depreciation for 2020, considering the business started in November.
Depreciation for 2020=Annual Depreciation×212\text{Depreciation for 2020} = \text{Annual Depreciation} \times \frac{2}{12} Depreciation for 2020=GHC5,000×212=GHC833.33\text{Depreciation for 2020} = GHC5,000 \times \frac{2}{12} = GHC833.33

STEP 5

Compute the written down value at the end of 2020.
Written Down Value=Cost of Trademark−Depreciation for 2020\text{Written Down Value} = \text{Cost of Trademark} - \text{Depreciation for 2020} Written Down Value=GHC50,000−GHC833.33=GHC49,166.67\text{Written Down Value} = GHC50,000 - GHC833.33 = GHC49,166.67
Since the options provided are rounded, the closest option to GHC49,166.67 is:
GHC49,164\boxed{GHC49,164}

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