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Hi I have been trying to work through the examples in chapter 26 deferred tax on the OT notes. Please could you explain example3 to me? and where has the 47 years of depreciation been given?
Thanks
JemmaThe property cost $500,000 and, as at date of revaluation, it had a book value of $470,000
It was purchased on 1 January, 1985 and was revalued on 31 December 1987. That’s three years during which the asset has been depreciated by $3,000. Over its full life, it would therefore have taken 50 years to write the asset off at the rate of $1,000 per annum of which 3 years have passed. Therefore the asset (subject to there being no information to the contrary about revision of estimated useful life) had a remaining useful life as at date of revaluation to $800,000 of 47 years
That probably explains / answers your questions but if there’s anything else, please let me know
thank you Mike but how do you know it has been depreciated at $3000? it does not give you any depreciation amounts in the question!!! i am using the new OT notes…
It cost 500,000 and it now sits in the company’s records at 470,000 (sorry, my previous post consistently missed off a zero) – references in my post to 3,000 and 1,000 should be 30,000 and 10,000
The asset is three years old and has been depreciated by 30,000 = 10,000 per annum
Is that better?
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