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DEPRECIATION

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › DEPRECIATION

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • August 12, 2022 at 4:54 pm #662970
    Eunice03
    Participant
    • Topics: 88
    • Replies: 70
    • ☆☆

    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?
    $_____________ ,000

    ANS
    $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 $700,000

    Good 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

    August 13, 2022 at 8:14 am #663004
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6764
    • ☆☆☆☆☆

    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

  • Author
    Posts
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