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Carrying amount

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Carrying amount

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • August 29, 2018 at 6:25 pm #470036
    priyashju30
    Member
    • Topics: 14
    • Replies: 13
    • ☆

    Hi sir I have a doubt in this particular question
    A company acquired a plant on 1st oct 2012 at cost of $500,000 .it has an expected life of 5 yrs . (straight line method ) and an estimated residual life of 10% of its historic cost or current cost as approiate . as at 30th sept 2014 , the manufacturer still makes the same plant and its current price is $600,000 .
    what its carrying amount to be shown in FS as at 30th sept 2014 under historic cost and current cost ?

    option a) Historic cost -320,000 and current cost -600,000
    b) Historic cost -320,000 and current cost -384,000

    correct ans is option A right ?

    but as per Bpp kit it is option B as the current cost is $600000 on 30th sept,2014 we should take that figure as carrying value and not charge deprecation on it

    August 30, 2018 at 9:15 pm #470217
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    When we’re calculating the current cost of the asset we use the current cost of $600,000 and then look at what the carrying value would be based upon the depreciation that would have been charged, so here two years.

    So the depreciable amount is $540,000 ($600,000 – (10% x $600,000)), and over the five years the annual depreciation is $108,000. Therefore after two years of depreciation, the carrying value is 384,000 ($600,000 – ($108,000 x 2 years)) under current cost accounting.

    Thanks

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