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Dear Mike,
I need your help again.
SOFP was prepared 31 December 2009On 1 January 2007 Hardy owned some items of equipment with a book value of 45M that had a fair value of 57M. These assets were originally purchased by Hardy on 1 January 2005 and are being depreciated over six years.
So the FV adjustment is 12M.
In the solutions the depreciation is calculated as 12M*3/4=9M
I’ve been thinking on this for the last 30 min but I can’t wrap my head around it. why3/4?
Probably it is me being stupid…Could you please enlighten me?Thanks very much.
Kind regards,
KatalinIf the revaluation is by $12m on 1 January, 2007 and we’re now looking at 31 December, 2009, that’s 3 years since the revaluation (year ends 31 December, 2007, 2008 and 2009) and they have been owned 2 years before they were revalued with only 4 years of life left
So, the revaluation by $12m took place three years ago with only 4 years of life left …
… need I go further?
Oh God…. I was playing with the dates around but never came to this…
Thanks very much Mike. It is clear.
Kind regards,
Katalin
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