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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 -384,000correct 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
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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