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  1. avatar says

    Hi,

    Could you please walk us thru the Test Question # 4?

    To me, they made a loss but loss is not an option in the MCs.

    This is my working.

    Depreciation expense p.a:($70,000-$7,000)/7yrs = $9,000 p.a.

    At the end of yr 2, the worth of the machine is $70,000-$18,000 = $52,000

    Two years later the useful life was revised to 3 remaining years, and at 31 Dec the machine was sold for $30,000 (at the end of yr3)

    ($52,000-$7,000)/3 = $15,000

    Machine worth by the end of yr3 = $52,000-$15,000 = $37,000

    PnL of Sale = $37,000-$30,000 = $7,000 loss.

    • avatar says

      At the beginning of 2002 the machine’s value is 52,000.
      You have to depreciate 15k for 2002 and 2003 which would give you 52k – 30k = 22,000 remaining on the asset value.

      30k – 22k = 8k profit

  2. avatar says

    Hello there,

    I’m confused regarding Example 5. The original cost of building was $3,600,000. and the revaluated amount was $3,072,000. Isn’t that a LOSS of $528K? Since the value of the building dropped.

    Thanks in adv.

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