Furniture and equipment
❖ Furniture and equipment was originally purchased on 1 July 2021 at a cost of
R1 680 000. Depreciation is provided at 10% p.a. This furniture and equipment was
destroyed by fire in the factory during the last week of April 2024 and was not insured.
The depreciation and loss as a result of the fire has been a correctly accounted for in the
operating expenses for the year. Despite the damage caused by the fire, Casio Ltd could
still continue business in its existing premises.
❖ On 1 June 2024 the company purchased new furniture and equipment. This new furniture
and equipment cost R2 100 000 and management considers it to have a useful life of 5
years and no residual value.
❖ The tax authorities have granted an annual allowance of 20% (this allowance is not
apportioned for time).
REQUIRED CALCULATE DEPRECIATION FOR FURNITURE AND EQUIPMENT
1. Calculation of depreciation for furniture and equipment destroyed by fire:
Depreciation per year = Cost of furniture and equipment * Depreciation rate
Depreciation per year = R1,680,000 * 10% = R168,000
Depreciation for the period from 1 July 2021 to last week of April 2024:
Depreciation for 2021 (9 months) = R168,000 / 12 * 9 = R126,000
Depreciation for 2022 = R168,000
Depreciation for 2023 = R168,000
Depreciation for portion of 2024 (up to last week of April) = R168,000 / 12 * 4 = R56,000
Total depreciation for furniture and equipment destroyed by fire = R126,000 + R168,000 + R168,000 + R56,000 = R518,000
2. Calculation of depreciation for new furniture and equipment purchased on 1 June 2024:
Annual depreciation for new furniture and equipment = Cost of new furniture and equipment * Annual allowance
Annual depreciation for new furniture and equipment = R2,100,000 * 20% = R420,000
3. Total depreciation expense for the year 2024:
Total depreciation expense = Depreciation for destroyed furniture and equipment + Depreciation for new furniture and equipment
Total depreciation expense = R518,000 + R420,000 = R938,000
Therefore, the total depreciation expense for furniture and equipment for the year 2024 is R938,000.