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
Ask the Tutor ACCA FR
Carrying amount
7y ago#1Hi,
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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