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Sorry Mike, I’m here again to ask stupid questions.
I don’t know what’s 6,000 (last line in TB extracts) for?
And I don’t know how 1,500 and 9,600 are calculated in the answer.
And in the last line but one in the answer (DR R+D Amortization), I think there is only development and no research.
Thank you in advance for your time looking at my questions!
R & D first – it’s always referred to as Research and Development – they’re inseparable when talking about them – they’re like the Heavenly twins Castor and Pollux. But for accounts purposes, research is ALWAYS expensed in the year in which it is incurred.
1,500 relates to the item of PPE which has been disposed of and incorrectly treated as a revenue sale. When you have unwound the incorrect treatment and then processed the details correctly, you’ll find that, on disposal, a loss was suffered of 1,500 ( cost 8, accumulated depreciation 4, proceeds of sale 2.5, therefore a loss of 1.5 )
9,600 is the depreciation on the PPE. Brought forward was 76,600 and accumulated depreciation of 24,600. Then we disposed of a piece of plant ( see previous paragraph! ) which had cost 8 and had been depreciated by 4. That brings our brought forward amounts down to 68,600 and 22,600. That’s a net book value of 48,000 and we are told that plant is depreciated by 20% per annum using the reducing balance method.
So, 20% of 48,000 is …… $9,600
Hope that helps
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