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- This topic has 3 replies, 2 voices, and was last updated 8 years ago by MikeLittle.
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- November 25, 2015 at 10:16 am #285136
Dear Mike, i am very confused about intragroup trading non-current assets, On 31 July 2011, Danute had sold an item of property, plant and equipment to Ausra realising a profit on sale of $ 36,000. Ausra was depreciating this item over its remaining useful life of 4 years. It is group policy to charge a full year’s depreciation in the year of purchase, and non in the year of sale, the answer is that Dr:cost of sale 27,000; Cr: PPE 27,000.
36,000/4=9000; 36000-9000=27000 at this situation why doesn’t it multiply 3/12? may be because this (It is group policy to charge a full year’s depreciation)
but in June 2011 Question 1 Prodigal,Immediately after the acquisition of Sentinel on 1 October 20×0, Prodigal transferred an item of plant with a carrying amount of $ 4m to Sentinel at an agreed value of $5m. At this date the plant had a remaining life of 2.5 years. Prodigal had included the profit on this transfer as a reduction in its depreciation costs. All depreciation is charged to cost of sales. the answer is that Dr: cost of sale 0.8; Cr Plant 0.8
(5m-4m)/2.5×6/12=0.2; 1-0.2=0.8, at this situation it is multiplied by 6/12!!
would you please tell me reason?
many thanksNovember 25, 2015 at 10:24 am #285138In Ausra / Danute, it is company policy to charge a full year in the year of purchase ….. and that explains the difference in treatment
November 25, 2015 at 10:32 am #285142thanks alot
November 25, 2015 at 11:11 am #285153You’re welcome
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