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Eunice03
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11 kaplan
The following trial balance extract relates to a property which is owned by Veeton as at
1 April 20X4.
Dr Cr
$000 $000
Property at cost (20 year original life) 12,000
Accumulated depreciation as at 1 April 20X4 3,600
On 1 October 20X4, following a sustained increase in property prices, Veeton revalued its
property to $10.8 million.
What will be the depreciation charge in Veeton’s statement of profit or loss for the year
ended 31 March 20X5?
$_____________ ,000ANS
$700,000
Six months’ depreciation to the date of the revaluation will be $300,000 (12,000/20 years
× 6/12). Six months’ depreciation from the date of revaluation to 31 March 20X5 would be
$400,000 (10,800/13.5 years remaining life × 6/12). Total depreciation is $700,000Good day, Please i don’t understand why the depreciation of the revalued property was divided by 13.5 years and not 19.5 years since it was revalued in october .I’ll appreciate if you can explain better
P2-D2
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Hi,
It was bought with a useful life of 20 years initially and there is 3,600 worth of depreciation charged on the initial cost of 12,000. Each year we will have charged 600 of depreciation (12,000/20). So, at the start of the year there will be 6 years to have passed and 14 years left on the life.
The asset is then revalued 6 months into the current year, hence the 13.5 years remaining life.
Thanks
Eunice03
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