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Cons. stat. of financial position

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Cons. stat. of financial position

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by MikeLittle.
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  • April 5, 2018 at 10:44 am #445131
    hemantjp
    Participant
    • Topics: 11
    • Replies: 7
    • ☆

    Hi,
    Chapter 7 practice question -1

    Fair value adjustment $2.4/8/3, I understand 8 years but do not understand where did you get 3 ?

    Thank you,

    April 5, 2018 at 3:51 pm #445168
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23333
    • ☆☆☆☆☆

    It’s part of the depreciation calculation on the fair value adjusted building

    $2,400,000 was the fair value adjustment and the building had an estimated further 8 years of useful life so, for a full year, the depreciation effect on that fair value adjustment would be $2,400,000 / 8 = $300,000

    But the acquisition took place part way through the year so there’s only 4 months (September – December) depreciation to calculate and if we take the annual depreciation of $300,000 and multiply by 4/12 we arrive at $100,000

    is that not the same as taking $300,000 / 3 = $100,000

    OK?

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