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Depreciation

CCandice5y ago
Good day Question 8.5 in the BPP revision kit 2020 - 2021 My question is: Am I to assume that buildings use an estimated useful life of 50 years when first purchased if not given the useful life info or a way to calculate the original useful life info? I got the question correct but I know the method I used would not work if I don't have options to choose from. I know it is not what you taught us in your lectures. I could not determine the original useful life used on the building to calculate the carrying amount for me to calculate the amount for the revaluation surplus so this is how I went about the question. I calculated the depreciation charge for the year: 1mil divided by 40 years (revalued amount divided by remaining useful life) = $25,000 That left 2 options, A or B For the revaluation surplus, I know it could not be A because the surplus is calculated, Revalued amount less the carrying amount at date of revaluation hence I chose B. The answer in the book indicate the building was already depreciated for 10 years, this assumes that the original estimated useful life was 50 years. I just want to confirm if this is expected. I want to be able to get my answer correct when I don't have options to choose from. Sir, thank you in advance for your time and patience.
CCandice5y ago#1
Hi, I see my question was ignored, please tell me what I need to do to fix it so I can get an answer. Thanks again
John MoffatJohn MoffatTutor5y ago#2
It is my fault - I must have accidentally missed your question. Sorry. :-( We know from the question that it was being depreciated at 2% a year. This is the same as depreciating over a life of 50 years. (100%/2% = 50). (In the same way, depreciation of 4% a year would mean an expected life of 25 years). The question should have made it clear that it was straight line depreciation at 2% per year (and that would be made clear in the exam).
CCandice5y ago#3
Thank you Mr Moffat!
John MoffatJohn MoffatTutor5y ago#4
You are welcome :-)
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