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Hi sir, I hope you are fine.
I am writing this question exactly i saw in exam kit. I solved the Question nd got wrong answer and i want to know if there is a gap in my concept or mistake in kaplan examkit.
Q-> On 1 January 2018, Barnstorm owned a building that cost $ 480,000 with the carrying value of $ 384,000. On that date, the building was valued t $ 600,000 and bar storm wishes to include that valuation. In its financial statements. Barnstorm’s accounting policy is to depreciate buildings at a rate of 2 % on a straight line basis and to make the annual transfer of ‘excess depreciation’.
What is the amount of excess depreciation that bar storm will make as a result of revaluation
I will follow up, the question by replying As soon as I receive your answer if my doubt is not solved. And plead for explanation as in solutions in exam kit. I hope you will come back today’s again to see this question as I have exam yesterday.
Wish me Luck for exam !The original depreciation was 2% x $480,000 = $9600 per year, and the building had been depreciated for (480,000 – 384,000) / 9,600 = 10 years.
Given that 2% straight line depreciation means it was being depreciated over a life of 50 years, then when revalued the remaining life is 40 years.
Therefore the new depreciation after the revaluation is 600,000 / 40 = $15,000 per year.
So the excess depreciation is 15,000 – 9,600 = $5,400.
Ohh, So we revenue Useful life everytime the asset is revalued? , I was depreciating the revlued amount by 2 ? again.
Gary, a sole trader, purchased a vehicle on 1 January 20X6. The vehicle cost $20,000 and was depreciated on a straight-line basis over four years with no residual value. On 1 January 20X9 Gary part-exchanged the vehicle for a new one costing $25,000. Gary paid cash of $18,000 towards the purchase of the vehicle.
What is the profit on disposal of the old vehicle to be included within the financial statements for the year ended 31 December 20X9?
Please help me with the answer to this question Mr. Maffot. My answer is $10000 but i dont have an answer to compare it with. If im wrong please explain this to me.
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