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On your CSOFP kaplan did not add any excess depreciation value but deducted increase in value of transfer of non current asset .
Question: on 31/12/2006. CA of PPE in the two companies is as follows:
West $300,000
Land $60,000On 1/1/2006 Land has transferred some property to west for $40,000. At the date of transfer the property , which had cost $42,000 had a CA of $30,000 and remaining useful life of five yrs.
What is the CA of PPE in the CSOFP of west as at 31/12/2006.
West has a 75% of subsidiary Land .
CA at yr end transfer 32,000(40,000 less 1 yr dep).
CA of d asset if had not been transferred 24,000 (30,000 less 1 yr dep)
Purp on NCA is 8,000(32-24)
Total of PPE 300,000 + 60,000 – 8000= $352,000You see , there was no addition of the excess dep ..
Is this correct ?
Your tactics :
Purp on transfer was = 10
Excess dep = 2
Purp (10-2) = 8
On COSFP
PPE 300+60 -10 + 2 = $352
I have asked you few weeks ago, before I came across this question today if it was necessary to add excess depExcess dep 6-8( 2,000)
The carrying value if it had not been sold would have been 30 – 6 = 24
The carrying value following the sale is 40 – 8 = 32
The difference is explained as a pup on transfer of 10 less an excess depreciation of 2
So deduct the pup of 10 and add back the excess depreciation of 2
When Kaplan has written: “Purp on NCA is 8,000(32-24)” is that not EXACTLY the same?
I can’t see where you’re going with this but hopefully you can see that in fact Kaplan HAS added back the excess depreciation but has chosen to hide that add back within their working
Whatever! Whichever you feel happier with, follow that method. Just make sure that you get the right result
OK?
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