- This topic has 5 replies, 2 voices, and was last updated 8 years ago by
.
- Posts
Hi. I have 2 question. I would be glad if you explain comprehensively.
1) For example we have a computer (costs 1000$) and we add a 2 gb RAM into it. RAM costs 200 $. I know that we record it an asset. and add that cost over 1000$. now we commence to depreciate 1200$. After some years we decide to replace that 2gb RAM with 6 gb RAM which costs 400 $. we remove that 2 gb ram from computer. lets suppose our computer carrying amount is 650 $ on that time. we will add 400$ over 650$ (carrying amount) and begin to depreciate it again. what will we do with 2 gb ram which we removed away it ?
2) in the definition and recognition of assets it is stated that we recognise item as an asset when it will bring economic benefits to the entity. F/example, we have bought expensive clock for our office , normally we record it an asset, because we will use it for long time and it have estimated value. to which extent is it true to record it as asset? because we will not get any economic benefit from it in future.
Thank you in advance
For question 1 you will need to determine the carrying value of the computer separate from the carrying value of the ram
Then, from the net carrying value of 650 you will deduct the element that represents the 2 gig leaving the element of carrying value that relates to the computer
Probably better to keep the ram(s) separate from the hardware and thus avoid this hassle!
Question 2 – no benefit from the office clock? Of course there is! If you hadn’t bought this one, you’d have had to buy another different one. Surely all offices have an office clock.
Class it as ‘furniture, fixtures and fittings’ and depreciate it probably over 10 years with regular reviews of remaining useful life
Ok?
1st question is clear. i am thankful for that. But in 2nd you say that having clock has benefits. in definition it is said economic benefit. what is ECONOMIC benefit of clock? if the office has a clock, which ECONOMIC benefit it will bring to entity?
It saves the entity from having to buy a different time piece
In addition, it’s a quick and easy way of ensuring that the office employees are not leaving their posts early and thus saves the entity from the disadvantage of over-paying their staff
Thirdly, it is SO immaterial that it really is not worth spending a second’s more time thinking / worrying about it!
🙂
- You must be logged in to reply to this topic.