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ABK Co bought a property on 31 December 20X3 for $340,000. At the date of purchase, ABK Co estimated the useful life of the property to be 32 years.
On 31 December 20X5, the property was revalued to $410,000. There was no change in its useful life.
On 30 June 20X7, ABK Co sold the property for $485,000.
ABK Co depreciates property on a straight line basis, with a proportional charge in the years of purchase and disposal.What is the profit on disposal of the property that should be recorded in ABK Co’s financial statements at 31 December 20X7?
could you please explain why haven’t we caln depre on 340000? and why does the solution show 410,000 – (410,000 x 1.5/30 years)
After the property was revalued, then depreciation is then calculated on the revalued amount.
As as 31 December 20X3 the useful life was 32 years. It was revalued 2 years later, so as at 31 December 20X5 the remaining life was 30 years.
Between the date of revaluation and the 30 June 20X7 is 1.5 years.
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