How did your June exams go?😞Rough😐Meh🙂Okay🎉Smashed it
FA
FA Chapter 6 Questions Depreciation
186 Comments
H
Hasan·
Mr Moffat, first of all thank you very much for these useful lectures.
Question 3 still confusing me. Please Have a look at the table below:
date b/f dep'n c/f
1 jan 2008 12.400 2.480 9.920
1 jan 2009 9.920 1.984 7.936
1 jan 2010 7.936 1.587 6.349
1 jan 2011 6.349 1.270 5.079
1 jan 2012 5.079 1.016 4.063
At the end of 2011 nbv valued 5097 and we dont charge at the year of sale. Thus in 2012 gain on sale was 85
What did I do wrong
H
Hasan·
my bad! So, year end is 31st of January! I got it now. Thank you. Message to all students: please read examples very carefully! Or you will end up like me in the example above
O
Odad·
Hey, so when the the useful life is revised, you have to subtract the residual value again. Why is that?
J
John MoffatTutor·
We are repeating the normal calculation using the new values for remaining life and residual value as though the 'cost' is now the current written down /carrying value.
D
DIYA·
hello please help me out with ques 3 why depreciation of selling year as been include ? please give brief explanation if possibble .
thank you .
J
John MoffatTutor·
The company year end is 31 January. The car was sold on 31 March 2012 which is during the year ending 31 January 2013.
F
Fion Yew·
For Question 5 can explain for me the all ? Why depreciation for the next two year need (52000-7000)/3
why ÷3 not 7year-2year=5year?
J
John MoffatTutor·
Because the question says that the remaining life is revised to 3 years.
A
Antonia·
Hi John,
Why with question 3 are does the answer include charging a full year of depreciation in the year of sale? Am I misunderstanding? I thought it was meant to be none in the year of sale as per the question.
Thanks in advance!
J
John MoffatTutor·
It doesnt include a full year in the year of sale. The year end is 31 January and so the sale was in the year ended 31 January 2013
E
Eloisa·
Hi John, surely since the sale is made in year 5, and no depreciation should be charged in the year of sale, there should only be 4 years worth of depreciation charged? In the solution, 5 years worth is charged.
J
John MoffatTutor·
Check the year end again (and my previous reply)
A
Anna·
Hi, I felt very confident about this topic, but unexpectedly, I ended up failing it. Based on the EDX course on reducing balance depreciation, I calculated it differently. But any one could tell me why they in q3 reducing balance depr. didnt folow -' the depreciation percentage is applied to a smaller figure each year, resulting in a lower depreciation charge each year'? Or this is not similar to Diminishing - balance depr.? Thnx
J
John MoffatTutor·
But the answer does follow that rule. (Have you looked at the answer by clicking on 'review quiz' after submitting your answers?)
And have you watched our free lectures on this topic?
D
Dolar·
Sir question 3 it says no depreciation charge in the year of sale, so the answer should not have depreciation for year 2012? am i wrong?
D
Dolar·
oh i was wrong about the date of sale, it turned next year
L
Lenny·
Qn 2. Why did we subtract the 30,000? Why do we have to add the depreciation expense from Jan 2014 to Oct 2014 even though the machine is sold on 1 Jan 2014?
Thank you in advance.
J
John MoffatTutor·
It was sold on 1 Jan 2014, but this is during the accounting period ending on 31 October 2014 (i.e. from 1 November 2013 to 31 October 2014).
F
Fumie·
Hi, Could you please help me to understand Q2,
Why do we have to add the depreciation expense from Jan 2014 to Oct 2014 even though the machine is sold on 1 Jan 2014?
Thank you in advance.
T
Tu·
it is the cost of the remaining machines. Although you sell 1 machine, we need to caculate the depreciation of others. That's why we subtract 30,000 (cost of the sold machine)
F
Fumie·
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.
J
John MoffatTutor·
It is explained in the lectures on Limited Companies (because it is only limited companies that will revalue for Paper FA).
N
Nayana·
80%
P
Peyman·
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.
J
John MoffatTutor·
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'.
S
Shayan·
it clearly says they sold the car on 31 march "2012"
J
John MoffatTutor·
Yes, and 31 March 2012 is during the year (12 months) to 31 January 2013
F
Fidan·
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?
J
John MoffatTutor·
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.
P
Parven·
Ans of question num 2 and solution
J
John MoffatTutor·
The solution will appear after you have submitted your answers and then clocked on 'review quiz'.
F
Faizan·
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.
J
John MoffatTutor·
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.
H
Hiba·
Hi, in Q3 i didn't understand from where you 7,048.80 and why you add 983.04 ?
J
John MoffatTutor·
It is to calculate the total depreciation they have charged. Did you watch mt free lectures on this before attempting the test?
H
Hiba·
hi, in
M
Maiah·
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
A
An·
teacher, what's "nbv at date of sale" mentioned in feedback of question 3? Thankyou
J
John MoffatTutor·
NBV is the net book value (or the carrying value). Have you watched our free lectures on this?
A
Amal·
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?
J
John MoffatTutor·
No. The question says that it is straight line depreciation.
A
Amal·
but the machine is more than a year old does that changes the cost of machine?
J
John MoffatTutor·
No - straight line depreciation is based on the original cost. Have you watched my free lectures on tis?
A
Amal·
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?
J
John MoffatTutor·
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.
A
Amal·
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?
J
John MoffatTutor·
We never do when using straight line depreciation.
E
Ebele·
I got 80%. I don’t understand question 2. Why 120,000-30000. I don’t understand
J
John MoffatTutor·
Have you checked the answer that appears when you review the quiz?
A
Amy·
Total machines: 120,0000
Sold a machine with originally cost: 30,000 => we must minus this figure.
A
Amal·
but the machine is more than 1 year old no so the value should be less than the original cost
A
Ar Kar·
that is wrong
J
John MoffatTutor·
What is wrong? (The answers to the quiz are correct :-) )
P
PIHU·
in question 3 ,,,...it is specically written none in the year of disposal then why u considered 2012......can u plz explain
J
John MoffatTutor·
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).
N
nadiu6·
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
J
John MoffatTutor·
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.
J
JNP·
Sir, if there isn't any depreciation charged for the year of sale, why is the figure of 983.04 added ?
J
John MoffatTutor·
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).
J
JNP·
Ah! Thank you Thank you Sir, clearly I wasn't paying enough attention.
I do Appreciate your prompt response!
M
Muqqa·
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
M
Muqqa·
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?
H
Htet·
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.
J
John MoffatTutor·
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.
H
Htet·
I get it , Thank you so much Sir
J
John MoffatTutor·
You are welcome :-)
J
Joseph Acca·
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
J
John MoffatTutor·
Thank you for your comment :-)
A
Ata·
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
J
John MoffatTutor·
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.
Y
Yi·
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!
J
John MoffatTutor·
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!!
I
Ima·
In question no. 5, do we have to take the residual value even after two years? But why? I thought it would be zero since nothing was mentioned regarding residual value.
J
John MoffatTutor·
Unless the question says that the expected residual value has changed after the change in the useful life, we always assume that the residual value remains the same, so in this question remains at $7,000.
J
Joanne·
Hello John,
Thank you for the great work. My question is for question 2, would it make a whole lot of a difference if the machine was bought and not sold on January 1st? How?
Thanks
J
John MoffatTutor·
Yes it would. Because it was sold the depreciation was only on the assets remaining. If it had been bought then there would have been more assets to depreciate.
M
mehrankhan105·
hi john
I hope you keeping well. First thing first is that I really appreciate the good work you are doing and I hope you will be keeping it up.
I have got 2 silly questions to ask its either I am thinking too much or it could be one of those situations where you will pick up on challenging stuff but would be lacking to understand the easy one.
question1. how would i know to that I have to calculate accumulated depreciation before I calculate year end depreciation expense for certain year. In some questions in Bp, they will calculate accumulated depreciation first and then depreciation expense to work out deprecation charge for the year and then in certain questions they will just calculate depreciation expense straightway without calculating acc depreciation. What's the trick?
Questions 2. Land (5m) and buildings at cost 35million y/e 01/10/2008
accumulated depreciation buildings at 01/10/2008 20 million
Both land and building were revalued on 31/12/2008 to land 8milion and building 39million
Company year end 30th September 2009
what will be the nbv of land and building after revaluation and depreciation at year end 2009.
Thanks in advance
J
John MoffatTutor·
You must ask questions like these in the Ask the Tutor Forum and not as a comment on a test :-)
X
Xintong·
Hi Sir, I have a question for Q2. Why do we need to calculate depreciation expense after the machine is sold? I think the answer should be $4,000. Thanks.
J
John MoffatTutor·
The machine sold was only one of their machines. The machines remaining still need to be depreciated. Read the question again very carefully.
A
Asif·
Thanks sir, useful test.
Q2 was quite dangerous. I understood only after I read your working after the quiz. First I thought we had to calculate in relation to that one machine. What a distraction. But we should have noticed, since the question was asking about the accumulated depreciation of a time period after the machine was sold. And the accumulated depreciation of all machines, 25,000 was just a distractor too. You did not even use it in your workings.
What I did not grasp was the Question 4. If the machine was sold at beginning of year 4, why did we not take that full year into account as well for depreciation- as some questions do say they charge the full year at time of selling (otherwise you in the lecture just take eg months/12 x cost x 20% ; and calculate depreciation of the months used for the purchase or selling year).
So really let me know, how to know 3 or 4 years ?
J
John MoffatTutor·
Questions often say a full years depreciation in the year of purchase, but never a full years depreciation in the year of sale. (What they do sometimes say is 'no depreciation in the year of sale').
Here it said nothing and so we time apportion the depreciation. Usually we apportion to the nearest month. Here it is 0 months to the nearest month (and obviously we would not depreciation in the year of sale when it sold at the very start of the year - it would be silly).
It is depreciated for 3 years.
A
Asif·
Thankyou.
Z
Zuzie·
Hi John
Q4- Why is this a loss and not a profit? If u do the T-account:
DR Asset 2400
CR Acc dep 1228.80
CR Cash 1200
Difference is on the DR side=28.80 profit?
Same method as Q3 where 1,067.84 was the profit ( 5000 cash & 8067.84 acc dep)
Why is this different?
J
John MoffatTutor·
The accumulated depreciation is not 1228.80 !!
The carrying value (net book value) is 1228.80. It is sold for 1200.00. Therefore a loss on disposal of 28.80.
Z
Zuzie·
Got it, got it, got it!!!! Thanks
J
John MoffatTutor·
You are welcome :-)
I
izaz·
sir i have problem in Q3 there says that depreciation is charged in year of purchase and non in the year of sale so why the depreciation of 2012 are included in accumulated depreciation
J
John MoffatTutor·
The question says that the company's year end is 31 January each year.
The car was sold on 31 March 2012 which is during year ended 31 January 2013, and no depreciation has been charged for year ended 31 January 2013.
T
Tushar Gujral·
dear John
In question 3 year ending is 31st jan and asset is purchased in starting of jan so why we haven't consider the 1 month depreciation
T
Tushar Gujral·
that is from 1 jan to 31 jan 2008 why we haven't consider this and instead of this we have taken whole year depreciation
J
John MoffatTutor·
Because the question specifically says "a full years charge in the year of purchase', which (as I explain in my free lectures) is very common both in real life and in the exam.
K
Khushali·
Hello sir, I am having a problem in Q5 too, the questions says two years later i.e. after 2001 and 2002 which basically means thats its at the end of 2002 so there is only one year remaining so why is the 15,000 still multiplied?
J
John MoffatTutor·
It was bought at the start of 2000, so 2 years later is the start of 2002.
T
tickwickz·
Hello sir, John. In Q5, why do we not add the accumulated depreciation of 2000 and 2001 for 2002 when the useful life has been revised? why shouldn't it be 52,000-(15000+18000)?
L
Loserian·
Dear John
I still have a problem in understanding question 2. Are they two different machines? on October 31st the machine cost was $120,000 while on April it has original cost of $30,000.
thanks a lot
regards
Laizer
J
John MoffatTutor·
They cannot be different machines!! The total cost of all the machines at the start of the period was $120,000. They then sold one that had cost $30,000 and so the cost of the machines left is then $90,000.
A
Annie·
Please help! The machine which cost $30000 was bought in 2012 which means it lasted 5 Years.how come we are using 10 months?
S
sameen555·
hello sir, regarding question 5 can you please explain me why we subtracted 52000 twice by 15000 ? shouldn't it be depreciated once since it was sold on 2003 ?
J
John MoffatTutor·
It was sold at the end of 2003, and so it was used throughout 2003 and depreciation will be charged for the whole of 2003.
E
Erick·
I am also confused on this part. The depreciation for the whole of 2013 should be 15,000 not (15,000 * 2) so I still don't understand why they multiplied.
J
John MoffatTutor·
It was revalued at the start of 2002. Therefore there were two more years depreciation by the end of 2003 - depreciation for 2002 and 2003.
Z
zaahid·
Hi sir,
I also have a question on number 5.
Shouldn't the NBV after 2 years be 63000 since the the residual value was marked at 7000 ?
M
MohamedSupporter·
Hi john. Can you please explain me question 5 a bit? I don't know why we take NBV when calculating the depreciation for the remaining three years. I thought the question was asking us to do straight line method depreciation and for what I have known, we normally don't take NBV when calculating depreciation in this method.
J
John MoffatTutor·
When we change the useful life, we need to then spread the NBV at that stage (less any residual value) over the remaining life.
(Otherwise, if you think about it, the total depreciation charged is not going equal the original cost less the residual value, and it total it must be equal)
M
MohamedSupporter·
Thank you sir. I got it now.
A
Aymen·
In question 4 it says the car was sold at the start of year 4, however we are not charging depreciation for the year although we sold it as the question says at the start of year 4. Thanks for all the work sir
J
John MoffatTutor·
That is correct - we will not charge depreciation in year 4 because it was sold at the start of the year.
J
John MoffatTutor·
bannsri: That is fine :-)
P
patel·
Dear sir for Q2
I did 20%3000=6000
And then 1 subtracted the this 6000 from the 25000 dep at 31oct 3013 and I still got the answer as 19000 is it right or just a coincidence
A
abdikani·
Sir I was told to calculate from 2008 to 2012
Why should I calculate an other year which may be 2013 and not charge depreciation I am confused
B
Bali·
Wow ?
J
John MoffatTutor·
Is 'wow' supposed to be a question?
Q
Quratul ain·
Lol may be . Wow ?
M
MohamedSupporter·
You just read the question very well. the question says their year ends on 31 January. They have a policy to charge full years depreciation on the year of purchase and none in the year of sale. Since the Car was purchased on 1 January, so you have to consider 1 February 2007- 31 January 2008 as your first year and then take depreciation for the remaining 4 years. I also faced the same issue but I got it corrected after reading the question again. This Question tells us how important is to read every single thing mentioned on the question.
A
abdikani·
Sorry sir I mean Q3
A
abdikani·
Sir in Q2 i calculated to the last year which is 31 January 2012 and found 983.04 as result
Why you calculated the same year again with result of 1067.84
I'm confused
Thanks
M
mirik·
Dear John,
I watched all lectures about depreciation. But I am confused with question 2. I can not understand why cost of machine is same as in april 2012. What about depreciation of previous period? Why we don't reduce the cost of machine for previous period if company have depreciation policy?
J
John MoffatTutor·
The depreciation in this question is charged on cost. The cost of a machine does not change (there is accumulated depreciation but this does not affect the original cost).
M
mirik·
Thank you very much John.
B
bossmwadi·
I am not understand Qn 3, the Depreciation is charged fully in the year of purchase and none in the year of sale. I am confused, I thought none means nothing is charged in the year of sale. Please help me to understand.
J
John MoffatTutor·
Nothing has been charged in the year of sale.
The year end is 31 January each year, and so the year of sale is the year ended 31 January 2013.
A
Aymen·
but you have, it was sold31 march2012
A
Aymen·
sorry i figured it out
J
John MoffatTutor·
I am glad that you figured it out :-)
H
hanh612·
Dear Sir,
I'm a little confuse with Q2. Why the machince cost 30.000$ wasn't depreciated in period from 1st November 2013 to 1st January 2014? It wasn't sold so it was still the company's assets and should be depreciated, right?
I'm not good at English, so if there are any grammatical errors, please ignore
J
John MoffatTutor·
It was depreciated - don't forget that the year end of this company was not 31 December, but was 31 October. So the year you are dealing with ia from 1 November 2013 to 31 October 2014.
H
hanh612·
Oh, I understand now. Thank you, Sir!
J
John MoffatTutor·
You are welcome :-)
K
Kok Hue·
The question says it was sold on 1 Jan 2014,
if the end of year of this company is fall on 31 Oct ,
isn't that we only need 2 months depreciation ?
Nov 2013 + Dec 2013 = 2 months ,
and there shold be no depreciation after the machine wa sold .
is it a typo that bought became sold ?
because the answer only make sense when the sold change to bought,
that's why the calculation included the 10 months depreciation expenses of the machine .
K
Kok Hue·
Ah.....now i see where is my misunderstanding ,
im too tire ....... hzzzzz
pls ignore my posts regarding to Q2,
I Solved .
thanks Sir.
U
uchihahosein·
the thing with these questions is that they never come like the examples taught in the lecture and notes.
J
John MoffatTutor·
You cannot expect in the exam that every question will be the same as questions in the lectures - the examiner can ask in a million different ways !!!
If you understand what is explained in the lectures then there should be no problem with the questions.
But that is why you must also use a Revision Kit from one of the ACCA approved publishers - they have lots more questions to check that you really do understand everything. Practice is just as vital as studying to be sure of passing the exam.
M
Maria·
Good Morning Mr. John In Q2 they didn’t mention the year end and I was using 31st Oct as a year end. In exam how may I know the accounting period year if it hasn’t been mentioned? Thank you
J
John MoffatTutor·
But the last line of the question says what the year end is!!!!
K
katetza·
Dear Sir,
Regarding Q5, can you please explain why do we have to subtract the residual value 7,000 twice?
Thank you.
J
John MoffatTutor·
The first time was to calculate the depreciation in the years before the revision of the useful life.
The second time was to calculate the depreciation charge for the years after the revision of the useful life,
H
htethlaing1989·
Sir Q3 Answer is 84.8(Profit).but sir answer
why 1067.84(profit)explain me sir.
J
John MoffatTutor·
The correct answer is $1067.84 profit. You should get a pop-up window showing the workings for the answer when you submit your answer.
S
sinafakhour·
i think he is right. we must not allocate depreciation for car in year of sale.and so the profit must be 84.8
J
John MoffatTutor·
He is certainly not right!! The answer does not charge depreciation in the year of sale!
Again, read the workings carefully that appear after answering the question. The sale occurs on 31 March 2012, which is during the year ended 31 January 2013. No depreciation has been charged for the year ended 31 January 2013.
T
tasha8552·
Good Day Mr. John,
I am really not getting question 2, I don't understand! why are we using the total cost of all the machines and the depreciation for same as oppose to the actual cost of the machine that we are selling and the depreciation for same? Also, I don't think I understand how the months and years are counted.
Can you assist me please?
J
John MoffatTutor·
Have you seen the pop-up answer that shows the workings (if not, then you have a pop-up blocker and need to switch it off).
The year is 1 November 2013 to 31 October 2014.
From 1 November 2013 to 31 December 2013 is 2 months, and for these two months the machines were 120,000 and so 120,000 needs depreciating for 2 months.
Then on 1 January 2014 they sold machines that had cost 30,000, so the machines left cost 90,000 and they need depreciating for the remaining 10 months.
The question wants the total depreciation expense for the year and all the machines they own need depreciating. It is straight line depreciation and so it is calculated on the cost - the accumulated depreciation is irrelevant to the calculation.
Have you watched the free lectures on depreciation?
F
Francisco·
Dear John, I did my workings slightly different but came to the same conclusion. Thus I would like to double check whether is purely coincidental or it's correct.
depreciation sold item 01.11.2013->31.12.2014 : 2/12*20%*30000=1000
depreciation rest of assets 01.11.2013->31.10.2014: (120000-30000)*20%=18000
total depreciation : 1000+18000=19000
J
John MoffatTutor·
No - it is not a coincidence and is fine :-)
N
Nandhini·
Dear John,
Regarding Q2, if the question request for Dep for the year 2014, therefore it should be $15,000. Why must be the 2013 (remaining amount depreciation) to be included in ? Need your assistance as to ensure my understanding on the recognition of depreciation amount is correct.
Thank you
N
Nandhini·
Its ok John. I manage to get the explanation for this. Found it on my own. Important here is the year end which i missed out to see.
J
John MoffatTutor·
Correct (and the year end is a common 'trick' in the exam) :-)
P
PRITHVI·
sir why have we charge depreciation for 2012 in question 3? it is said in the question that no depreciation must be charged in the year of sale. im stucked
J
John MoffatTutor·
The year end is 31 January each year. Since the sale was on 31 March 2012, it was sold in the year ended 31 January 2013 and no depreciation has been charged for that year.
S
Shabnam·
The question says it was sold on 31st March 2012. We don't have to charge depreciation for 2012, do we?
Please correct and explain if I'm wrong.
C
CHIBUGO·
Dear John. Thank for your lecture. Great one. But please for the first time i'm so confused with a question. In question 3, i still don't understand why we charged depreciation in 2012....which is year of sale.
Yes i understand the year ends in 31 Jan 2013 but that accounting year would have started in Feb, 2012. And the car was sold 31 March 2012. So it was sold within the accounting year and as such depreciation shouldnt be charged in that accounting year.
please help clarify.
Thank you
J
John MoffatTutor·
The year of sale is the year ended 31 January 2013, which is 1 February 2012 to 31 January 2013, and no depreciation has been charged on it during that year.
M
Mohamed·
1. At 30 september 20x2, the following balances existed in the records of lambda co:
Plant and equipment:
Cost $ 860,000
Accumulated depreciation $397,000
During the year ended 30 september 20x3, Plant with written down of $37,000 was sold for 49,000. The plant had originally cost of 80,000. Plant purchased during the year cost $ 180,000. It the lambda Co's policy to charge a full year's depreciation in the year of acquisition of an asset and non in the year of sale, using rate 10% on the straight line Basis.
What is the carring amount that should appear in lambda Co's Statement of financial position at 30 september 20x3 for the plant and equipment?
2. what is the different between written off and written down
J
John MoffatTutor·
Please do not ask this sort of question as a comment on a test.
You should ask in the Ask the Tutor Forum. (Although don't expect a full answer to a full question - you must have an answer in the same book in which you found the question, and you should ask about whatever it is in the answer that you do not understand)
M
Mohamed·
John Moffat, thank alot for the explanation and guidance you have advised me. Please can you explain 2. what is the different between written off and written down?
what is the written down stand for there?
J
John MoffatTutor·
We write off debts if they are irrecoverable - that means we complete remove them.
We write down non-current assets, by depreciating them - this means we reduce their value in the Statement of financial position.
T
thanhha·
Dear Sir,
I understood answer of question 2. The data 25,000 (depreciation acc) and 10,000(the price of sale) no need for answer. In the exam,wherether abandon of data like this? Thank you!
J
John MoffatTutor·
This question is typical of exam questions - very often not all the data is relevant. The examiner is testing that you do know which of the figures are relevant.
Z
zanele82·
trully sir if yaer end is 31 jan each year.So from 1 january when the car was bought to 31 january 2008 it should 1 month .These date calculations are confusing now
J
John MoffatTutor·
You have not said which question you are asking about.
If it is the first question, then the question says that their policy is to have a full years charge in the year of purchase.
Have you watched the free lectures on this? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well. There is no point in attempting the tests until after you have watched the relevant lectures.
J
juliantjy8·
Hi Sir , I'm having trouble in question 2&3 I seem to can get the right answer . Can you please guide me
J
John MoffatTutor·
The answers pop-up with workings after you have attempted the question, so you will have to say which bit of the workings you are not clear about :-)
(I do assume that you have watched the free lectures first?)
A
azeem9196·
Hi sir,
For question 3, how did you get the value 7084.80 for the working out of the NBV?
J
John MoffatTutor·
The accumulated depreciation up to 31 Jan 2011 is 2400 + 1920 + 1536 + 1228.80 = 7084.80
(Then add on the 983.04 for 31 Jan 2012 to get the accumulated depreciation at the date of sale )
R
rajwan·
sorry ,but think we shouldn't calculate dep for 2012 as in question said ( charge none of the year of sale ) , please correct me if i'm wrong !
J
John MoffatTutor·
You are wrong, because the year of sale is the year to 31 January 2013. So there is depreciation for the year to 31 January 2012.
Z
zanele82·
Hi Sir
Please assist me on question 5
Why is that the residual value remains unchanged after 2 years .Is it an assumption that its should not change or since we are not told otherwise we also supposed to assume that it remains the same.
J
John MoffatTutor·
The residual value is the expected value at the end of its life. It's total useful life has not changed and so there is no reason why it's residual value should change (unless of course the question had said that it had changed)
Z
zanele82·
okay i get it thank u sir
J
John MoffatTutor·
You are welcome :-)
S
soltanovaleyla·
Hello!
In the question 2, if we sold the machine on January 2014, why do we still depreciate it till the year end?
J
John MoffatTutor·
We don't!!!
Check the answer carefully - up until January all the machines are depreciated. From January to the end of the year (31 October) only the remaining machines (with a cost of 90,000) are depreciated.
K
kateyllng·
for question 2, the machine had original cost $30000 on 1 April 2012.
Is it another machine and need to depreciate in 2013 also?
In total 2 machines, one cost $120000, one cost $30000?
J
John MoffatTutor·
No - you are not reading carefully enough.
The 120,000 was the cost of the machines, and so it included the one that was later sold.
So you need to calculate depreciate on 120,000 for the months up to the date of the sale, and then for the remaining months on only 90,000 - the cost of the machines remaining.
A
amina·
Love
L
Lucy·
Okay so I looked back carefully at the dates/workings and I understand now. Thank you!
J
John MoffatTutor·
You are welcome :-)
T
to you·
Sir.
For the question 2.
Why the depreciation in year 2014 is $15000?? They already sold the machine ay Jan 2014. I think. The calculating of depreciation in 2014 should be ended at January, not cover till october.
J
John MoffatTutor·
The 15,000 is the depreciation on the remaining machines - the ones that were not sold. Their original cost was 120,000 - 30,000 = 90,000.
D
diya·
hello,
Chapter 6 Practice Ques No.3
the Correct answer is $84.80? Depreciation should not be charged in the yr of Sale that is , in 2012.
Y
Yeewai·
Sold in March 2012, the year end is 31 January. that's! why ..
Y
Yeewai·
Because they sole in 2012 March, the year end is 31 January 2012. So need to calculate to 31 January 2012 (1year).
J
John MoffatTutor·
Yeewai: Correct :-)
Diva: Check the dates again!
L
Lucy·
Hi,
I'm also equally as confused as Diva. If the year ended 31 Jan 2012 and the equipment was sold in March 2012, would another year not have begun 1 Feb 2012 - 31 Jan 2013? - As March 2012 is within that accounting year why are we charging depreciation for the whole year? so confused sorry.
J
John MoffatTutor·
Look at the workings that appear after you have submitted your answer.
Depreciation is charged for year ended 31 Jan 2008 (the year in which is what), 2009, 2010, 2011, and 2012.
It was sold during year ended 31 Jan 2013 and so depreciation is charged in that year because there is no depreciation in the year of sale.
Question 3 still confusing me. Please Have a look at the table below:
date b/f dep'n c/f
1 jan 2008 12.400 2.480 9.920
1 jan 2009 9.920 1.984 7.936
1 jan 2010 7.936 1.587 6.349
1 jan 2011 6.349 1.270 5.079
1 jan 2012 5.079 1.016 4.063
At the end of 2011 nbv valued 5097 and we dont charge at the year of sale. Thus in 2012 gain on sale was 85
What did I do wrong
thank you .
why ÷3 not 7year-2year=5year?
Why with question 3 are does the answer include charging a full year of depreciation in the year of sale? Am I misunderstanding? I thought it was meant to be none in the year of sale as per the question.
Thanks in advance!
And have you watched our free lectures on this topic?
Thank you in advance.
Why do we have to add the depreciation expense from Jan 2014 to Oct 2014 even though the machine is sold on 1 Jan 2014?
Thank you in advance.
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.
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.
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?
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.
the cost of machine would have been already depreciated by 8500(6000+2500).so it should be (120000-21500)*20%*(10/12) right?
Sold a machine with originally cost: 30,000 => we must minus this figure.
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
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.
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).
I do Appreciate your prompt response!
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
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?
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
Thanks In Advance
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!
In all cases, if there is no scrap value given then we assume that there is no scrap value - you cannot invent a figure!!
Thank you for the great work. My question is for question 2, would it make a whole lot of a difference if the machine was bought and not sold on January 1st? How?
Thanks
I hope you keeping well. First thing first is that I really appreciate the good work you are doing and I hope you will be keeping it up.
I have got 2 silly questions to ask its either I am thinking too much or it could be one of those situations where you will pick up on challenging stuff but would be lacking to understand the easy one.
question1. how would i know to that I have to calculate accumulated depreciation before I calculate year end depreciation expense for certain year. In some questions in Bp, they will calculate accumulated depreciation first and then depreciation expense to work out deprecation charge for the year and then in certain questions they will just calculate depreciation expense straightway without calculating acc depreciation. What's the trick?
Questions 2. Land (5m) and buildings at cost 35million y/e 01/10/2008
accumulated depreciation buildings at 01/10/2008 20 million
Both land and building were revalued on 31/12/2008 to land 8milion and building 39million
Company year end 30th September 2009
what will be the nbv of land and building after revaluation and depreciation at year end 2009.
Thanks in advance
Q2 was quite dangerous. I understood only after I read your working after the quiz. First I thought we had to calculate in relation to that one machine. What a distraction. But we should have noticed, since the question was asking about the accumulated depreciation of a time period after the machine was sold. And the accumulated depreciation of all machines, 25,000 was just a distractor too. You did not even use it in your workings.
What I did not grasp was the Question 4. If the machine was sold at beginning of year 4, why did we not take that full year into account as well for depreciation- as some questions do say they charge the full year at time of selling (otherwise you in the lecture just take eg months/12 x cost x 20% ; and calculate depreciation of the months used for the purchase or selling year).
So really let me know, how to know 3 or 4 years ?
Here it said nothing and so we time apportion the depreciation. Usually we apportion to the nearest month. Here it is 0 months to the nearest month (and obviously we would not depreciation in the year of sale when it sold at the very start of the year - it would be silly).
It is depreciated for 3 years.
Q4- Why is this a loss and not a profit? If u do the T-account:
DR Asset 2400
CR Acc dep 1228.80
CR Cash 1200
Difference is on the DR side=28.80 profit?
Same method as Q3 where 1,067.84 was the profit ( 5000 cash & 8067.84 acc dep)
Why is this different?
The carrying value (net book value) is 1228.80. It is sold for 1200.00. Therefore a loss on disposal of 28.80.
The car was sold on 31 March 2012 which is during year ended 31 January 2013, and no depreciation has been charged for year ended 31 January 2013.
In question 3 year ending is 31st jan and asset is purchased in starting of jan so why we haven't consider the 1 month depreciation
I still have a problem in understanding question 2. Are they two different machines? on October 31st the machine cost was $120,000 while on April it has original cost of $30,000.
thanks a lot
regards
Laizer
I also have a question on number 5.
Shouldn't the NBV after 2 years be 63000 since the the residual value was marked at 7000 ?
(Otherwise, if you think about it, the total depreciation charged is not going equal the original cost less the residual value, and it total it must be equal)
I did 20%3000=6000
And then 1 subtracted the this 6000 from the 25000 dep at 31oct 3013 and I still got the answer as 19000 is it right or just a coincidence
Why should I calculate an other year which may be 2013 and not charge depreciation I am confused
Why you calculated the same year again with result of 1067.84
I'm confused
Thanks
I watched all lectures about depreciation. But I am confused with question 2. I can not understand why cost of machine is same as in april 2012. What about depreciation of previous period? Why we don't reduce the cost of machine for previous period if company have depreciation policy?
The year end is 31 January each year, and so the year of sale is the year ended 31 January 2013.
I'm a little confuse with Q2. Why the machince cost 30.000$ wasn't depreciated in period from 1st November 2013 to 1st January 2014? It wasn't sold so it was still the company's assets and should be depreciated, right?
I'm not good at English, so if there are any grammatical errors, please ignore
if the end of year of this company is fall on 31 Oct ,
isn't that we only need 2 months depreciation ?
Nov 2013 + Dec 2013 = 2 months ,
and there shold be no depreciation after the machine wa sold .
is it a typo that bought became sold ?
because the answer only make sense when the sold change to bought,
that's why the calculation included the 10 months depreciation expenses of the machine .
im too tire ....... hzzzzz
pls ignore my posts regarding to Q2,
I Solved .
thanks Sir.
If you understand what is explained in the lectures then there should be no problem with the questions.
But that is why you must also use a Revision Kit from one of the ACCA approved publishers - they have lots more questions to check that you really do understand everything. Practice is just as vital as studying to be sure of passing the exam.
Regarding Q5, can you please explain why do we have to subtract the residual value 7,000 twice?
Thank you.
The second time was to calculate the depreciation charge for the years after the revision of the useful life,
why 1067.84(profit)explain me sir.
Again, read the workings carefully that appear after answering the question. The sale occurs on 31 March 2012, which is during the year ended 31 January 2013. No depreciation has been charged for the year ended 31 January 2013.
I am really not getting question 2, I don't understand! why are we using the total cost of all the machines and the depreciation for same as oppose to the actual cost of the machine that we are selling and the depreciation for same? Also, I don't think I understand how the months and years are counted.
Can you assist me please?
The year is 1 November 2013 to 31 October 2014.
From 1 November 2013 to 31 December 2013 is 2 months, and for these two months the machines were 120,000 and so 120,000 needs depreciating for 2 months.
Then on 1 January 2014 they sold machines that had cost 30,000, so the machines left cost 90,000 and they need depreciating for the remaining 10 months.
The question wants the total depreciation expense for the year and all the machines they own need depreciating. It is straight line depreciation and so it is calculated on the cost - the accumulated depreciation is irrelevant to the calculation.
Have you watched the free lectures on depreciation?
depreciation sold item 01.11.2013->31.12.2014 : 2/12*20%*30000=1000
depreciation rest of assets 01.11.2013->31.10.2014: (120000-30000)*20%=18000
total depreciation : 1000+18000=19000
Regarding Q2, if the question request for Dep for the year 2014, therefore it should be $15,000. Why must be the 2013 (remaining amount depreciation) to be included in ? Need your assistance as to ensure my understanding on the recognition of depreciation amount is correct.
Thank you
Please correct and explain if I'm wrong.
Yes i understand the year ends in 31 Jan 2013 but that accounting year would have started in Feb, 2012. And the car was sold 31 March 2012. So it was sold within the accounting year and as such depreciation shouldnt be charged in that accounting year.
please help clarify.
Thank you
Plant and equipment:
Cost $ 860,000
Accumulated depreciation $397,000
During the year ended 30 september 20x3, Plant with written down of $37,000 was sold for 49,000. The plant had originally cost of 80,000. Plant purchased during the year cost $ 180,000. It the lambda Co's policy to charge a full year's depreciation in the year of acquisition of an asset and non in the year of sale, using rate 10% on the straight line Basis.
What is the carring amount that should appear in lambda Co's Statement of financial position at 30 september 20x3 for the plant and equipment?
2. what is the different between written off and written down
You should ask in the Ask the Tutor Forum. (Although don't expect a full answer to a full question - you must have an answer in the same book in which you found the question, and you should ask about whatever it is in the answer that you do not understand)
what is the written down stand for there?
We write down non-current assets, by depreciating them - this means we reduce their value in the Statement of financial position.
I understood answer of question 2. The data 25,000 (depreciation acc) and 10,000(the price of sale) no need for answer. In the exam,wherether abandon of data like this? Thank you!
If it is the first question, then the question says that their policy is to have a full years charge in the year of purchase.
Have you watched the free lectures on this? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well. There is no point in attempting the tests until after you have watched the relevant lectures.
(I do assume that you have watched the free lectures first?)
For question 3, how did you get the value 7084.80 for the working out of the NBV?
(Then add on the 983.04 for 31 Jan 2012 to get the accumulated depreciation at the date of sale )
Please assist me on question 5
Why is that the residual value remains unchanged after 2 years .Is it an assumption that its should not change or since we are not told otherwise we also supposed to assume that it remains the same.
In the question 2, if we sold the machine on January 2014, why do we still depreciate it till the year end?
Check the answer carefully - up until January all the machines are depreciated. From January to the end of the year (31 October) only the remaining machines (with a cost of 90,000) are depreciated.
Is it another machine and need to depreciate in 2013 also?
In total 2 machines, one cost $120000, one cost $30000?
The 120,000 was the cost of the machines, and so it included the one that was later sold.
So you need to calculate depreciate on 120,000 for the months up to the date of the sale, and then for the remaining months on only 90,000 - the cost of the machines remaining.
For the question 2.
Why the depreciation in year 2014 is $15000?? They already sold the machine ay Jan 2014. I think. The calculating of depreciation in 2014 should be ended at January, not cover till october.
Chapter 6 Practice Ques No.3
the Correct answer is $84.80? Depreciation should not be charged in the yr of Sale that is , in 2012.
Diva: Check the dates again!
I'm also equally as confused as Diva. If the year ended 31 Jan 2012 and the equipment was sold in March 2012, would another year not have begun 1 Feb 2012 - 31 Jan 2013? - As March 2012 is within that accounting year why are we charging depreciation for the whole year? so confused sorry.
Depreciation is charged for year ended 31 Jan 2008 (the year in which is what), 2009, 2010, 2011, and 2012.
It was sold during year ended 31 Jan 2013 and so depreciation is charged in that year because there is no depreciation in the year of sale.