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FA Chapter 6 Questions Depreciation
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Hi John, I couldn’t solve Q5 so tried to go back to the lecture on youtube..
I couldn’t find the lecture for Chapter 6 Example 5, only up to Example 4.
Could you let me know where I can find the vlecture please?
Thank you in advance.
It is explained in the lectures on Limited Companies (because it is only limited companies that will revalue for Paper FA).
80%
answer 3 would be
Book value at the end of 2012 = $12,000 – $2,400 (2008) – $1,920 (2009) – $1,536 (2010) – $1,228.80 (2011) – $983.04 (2012) = $4,915.20.
Finally, calculate the profit or loss on the sale:
Profit or loss = Sale price – Book value at the end of 2012 = $5,000 – $4,915.20 = $84.80.
Therefore, the profit on the sale of the car is $84.80.
That is not correct. The question says that there is no depreciation in the year of sale, and the year of sales is the year to 31 January 2013. The workings for the correct answer are shown after you click on ‘review quiz’.
it clearly says they sold the car on 31 march “2012”
Yes, and 31 March 2012 is during the year (12 months) to 31 January 2013
Hi John,
For qs 3, it says not depreciating on the year of a sale so why do we still take depreciation of that year into account as well?
We do not. The year end is 31 January each year. The sale is on 31 March 2012 which is during the year ended 31 January 2013.
Ans of question num 2 and solution
The solution will appear after you have submitted your answers and then clocked on ‘review quiz’.
Where it has been told in question 2 that 30000 of machine is part of 120000, I was regarding it as a separate part. If it says in question that it’s a part then it’s plausible to deduct 120000-30000, or else it’s not.
There is no machine!
The question says that they purchased a car and then later they sold it. Therefore there is no doubt that what they sold was the same car.
Hi, in Q3 i didn’t understand from where you 7,048.80 and why you add 983.04 ?
It is to calculate the total depreciation they have charged. Did you watch mt free lectures on this before attempting the test?
hi, in
Hi,in question 5 i am a bir confused on why we multiply 2*15000 as to my understanding we have 3 remaining years left,so why are we multiplying 15000 by 2.Can you please explain
teacher, what’s “nbv at date of sale” mentioned in feedback of question 3? Thankyou
NBV is the net book value (or the carrying value). Have you watched our free lectures on this?
sir for question 2 2nd part
the cost of machine would have been already depreciated by 8500(6000+2500).so it should be (120000-21500)*20%*(10/12) right?
No. The question says that it is straight line depreciation.
but the machine is more than a year old does that changes the cost of machine?
No – straight line depreciation is based on the original cost. Have you watched my free lectures on tis?
yes sir i have watched it completely.so you are saying that there will be no depreciation for the period from april 2012 to october 2013 for that machine as its cost remain same as of the purchase date?
I am not saying that at all. There is depreciation for the entire period that the machine is owned. but the cost doesn’t change and straight line depreciation is based on the original cost.
another query accumulated depreciation is also mentioned in que.if we take original cost then why that 25k did not taken into consideration while calculating depreciation?
We never do when using straight line depreciation.
I got 80%. I don鈥檛 understand question 2. Why 120,000-30000. I don鈥檛 understand
Have you checked the answer that appears when you review the quiz?
Total machines: 120,0000
Sold a machine with originally cost: 30,000 => we must minus this figure.
but the machine is more than 1 year old no so the value should be less than the original cost
that is wrong
What is wrong? (The answers to the quiz are correct 馃檪 )
in question 3 ,,,…it is specically written none in the year of disposal then why u considered 2012……can u plz explain
The 983.04 is the depreciation for the accounting year ended 31 January 2012. The sale occurred on 31 March 2012 which is in the accounting year ended 31 January 2013 (i.e. between 1 February 2012 and 31 January 2013).
Hi from my side as well.
Thank you for an amazing info and quiz.
May i ask you please in Question 2 – why if we sell the building in January 2014, we book the depreciation till end of the year end?
I assume that we need to stop till Jan and the real NBV till that date and then check the profit or loss.
Thank you in advance
Nadya
We do not charge depreciation on the asset sold until the year end. For the first 2 months the assets were costing 120,000 and so there is depreciation on 120,000 for two months. After selling an asset that had cost 30,000, the remaining assets must have cost 90,000 and they will be depreciated for the remaining 10 months.
The NBV is of no relevance because it is straight line depreciation, and the profit or loss on sale is not relevant for this question because it only asks for the depreciation expense.
Sir, if there isn’t any depreciation charged for the year of sale, why is the figure of 983.04 added ?
I assume that you are referring to question 3.
The 983.04 is the depreciation for the accounting year ended 31 January 2012. The sale occurred on 31 March 2012 which is in the accounting year ended 31 January 2013 (i.e. between 1 February 2012 and 31 January 2013).
Ah! Thank you Thank you Sir, clearly I wasn’t paying enough attention.
I do Appreciate your prompt response!
At 31 December 2004 Q, a limited liability company, owned a building that cost $800,000 on 1 January 1995. It
was being depreciated at two per cent per year.
On 1 January 2005 a revaluation to $1,000,000 was recognised. At this date the building had a remaining useful life
of 40 years.
What is the depreciation charge for the year ended 31 December 2005 and the revaluation reserve balance as at
1 January 2005?
Please help me for this question thanks
At 31 December 2004 Q, a limited liability company, owned a building that cost $800,000 on 1 January 1995. It
was being depreciated at two per cent per year.
On 1 January 2005 a revaluation to $1,000,000 was recognised. At this date the building had a remaining useful life
of 40 years.
What is the depreciation charge for the year ended 31 December 2005 and the revaluation reserve balance as at
1 January 2005?
at question 3. None in the year of sale it mean no need to depreciation for 2012 .In answer I alittle confused . Please kindly explain it. sorry for my English.
The company year end is 31 January and so the year of sale is the year ended 31 January 2013 and there is no depreciation for this year.
I get it , Thank you so much Sir
You are welcome 馃檪
All thanks belong to Allah to start with.
Thanks to OpenedTuition for this very good help.
I just read the material and did the quiz or test with regards to this topic and scored 100%
Special thanks to you, Mr. John Moffat
Thank you for your comment 馃檪
At question 5 the machine was used between 2001 and 2003 that is 3 years but there are four years depreciation calculated on the answer. Before checking the answer I calculated 70,000 – (9,000+9,000+15,000) but there is an additional 15,000 where did it come from ?
Thanks In Advance
The machine was bought on 1 January 2000 and sold on 31 December 2003, which means that there are 4 years of depreciation. The first 2 years the depreciation is 9,000 per year and for the second 2 years it is 15,000 per year.
Hi John, I have a question regarding question 2.
Do we just assume the depreciation policy is without any scrap value at the end of life of use?
Thank you so much for the channel, It has been a tremendous help for me!
If it is straight line depreciation given as a %, then it is always a % of cost (even if you are given a scrap value).
In all cases, if there is no scrap value given then we assume that there is no scrap value – you cannot invent a figure!!