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At 30 September 20X2, the following balances existed in the records of Lambda:
Plant and equipment:
Cost $860,000
Accumulated depreciation $397,000
During the year ended 30 September 20X3, plant with a written down value of $37,000 was
sold for $49,000. The plant had originally cost $80,000. Plant purchased during the year
cost $180,000. It is the company’s policy to charge a full year’s depreciation in the year of
acquisition of an asset and none in the year of sale, using a rate of 10% on the straight line
basis.
What net amount should appear in Lambda’s statement of financial position at 30
September 20X3 for plant and equipment?
A $563,000
B $467,000
C $510,000
D $606,0001st question
the solution way of Kaplan is so
860-80+180=960
and 960-(397-43)=354
960-354-96=510000$ is the answerbut l can not understand why took place (397-43)
the test says;
“During the year ended 30 September 20X3, plant with a written down value of $37,000 was
sold for $49,000”.
if plant with written down(37000$) belongs to 2013
why should be affected accumulated depreciation of 2012???
beacuse accumulated depreciation of 2012 should be calculated separately ,but generally,depreciation of 2013 should NOT be calculated according to“It is the company’s policy to charge a full year’s depreciation in the year of
acquisition of an asset and none in the year of sale, using a rate of 10% on the straight line
basis”2nd question; depreciation of plant for 80000$ according to 2013 is 43000$?
The Kaplan answer is correct.
The asset sold did exist at 30 September X2 and therefore included in the balances at X2 was the cost of the asset sold (80,000) and the accumulated depreciation on the asset sold (80,000 – 37,000 = 43,000).
Therefore to get the balances as at the 30 September X3, we need to remove the 80,000 from the cost, remove the 43,000 from the accumulated depreciation (and then, obviously, add the cost of the new asset, and charge depreciation for X3).The depreciation for X3 is calculated on the assets that were not sold, plus the new asset that was purchased. So the depreciation is 10% x (860,000 – 80,000 + 180,000) = 96,000.
So the cost at the end of X3 = 860,000 – 80,000 + 180,000 = 960,000
The accumulated depreciation at the end of X3 = 397,000 – 43,000 + 96,000 = 450,000Therefore the net amount at X3 = 960,000 – 450,000 = 510,000.
I do suggest that you watch my free lectures on non-current assets. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Hello all, and how to solve this question using carrying amount method not cost method??
I am astonished that you needed to ask this, because all the figures required are in my previous reply.
You take the carrying value at the start of the year (463,000), subtract the carrying value of the asset sold (37,000), add the cost of the asset purchased (180,000) and subtract the depreciation for the year (96,000).
The workings for all of these figures are in my previous answer.
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