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Could please anyone explain me calculation of freehold property?
It’s BPP Study Text, p.192“J Co acquired 60% of P Co on 1 January 20X5.
Statements of financial position at 31 December 20X5 are given.
At the date of acquisitoin of P Co, the fair value of its freehold property was considered to be $400,000 greater than its value in P Co’s statement of financial position. P Co had acquired the property in January 20W0 and the buildings element (comprising 50% of the total value) is depreciated on cost over 50 years”.Answer of freehold property includes:
$400,000 Fair value adjustment
$(30,000) Additional depreciation (400×50%/40)*6 years (period after acquisition)Where does this 40 come from??
And what does 20W0 (not 20X0) means in questions – is it just another year in the past (earlier for 10/20/30/40… than current year 20X0)?Thank you
Is it right, that if we have 20X0 and 20W0 years mentioned in our question, it simply means that 20W0 is ten years earlier then 20X0?? (just because W is earlier then X in the alphabet)?
need help accounting building revaluation
Ballec PLC the year ending 31 December 2012
ii) Building X and building Y were both purchased 5 years ago for £1m each and were estimated to have useful lives of 50 years at acquisition. Building X is used in the business of Ballance plc whereas building Y is an investment property. Ballance uses the fair value method as allowed by IAS40 to value investment properties.
As at 31 December 2011 both buildings were valued at £2m each and these valuations were reflected in the accounts for that year. Remaining useful lives of both buildings were revised to 50 years at that date.
At 31 December 2012 both buildings were valued at £2.5m each. These valuations are to be reflected in the accounts.
Ballance plc provides depreciation on a straight line basis charging one month depreciation for each complete month of ownership.But dear sangria the acquisition is at 20X5 ,so the dep. is over 36 years, not at 40…..
I found out my mistake.
J Co acquired 60% of P Co on 1 January 20X0 (not 20X5). So now I understand how 40 years appeared..
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