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Hi can you please explain this question to me. I dont understand how the remaining useful life after revaluation is 13.5 years. Please explain in detail if possible. Thank you!
This question is from the Kaplan Exam Kit, Question 11.The following trial balance extract relates to a property which is owned by Veeton as at 1 April 20X4.
Property at cost $12000 Dr
Accumulated Depreciation as at 1 April 20X4 $3600 CrOn 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?I realize i missed the 20 year original life of the property at cost! Other than that there is no more information provided. This a Section A question.
Barb have you done the FR exam already? If you have, could you offer me some advice or thoughts on how i should approach the questions in each section. I would greatly appreciate it. Thanks!
It cost $12,000 and has a 20 year life. So annual depreciation is $12,000 / 20 = $600
Accumulated depreciation at 1 April is $3,600, so expired life is $3,600 / $600 = 6 years
Revaluation takes place on 1 October, and that’s 6 months into the seventh year
As at 1 April, it has been depreciated for 6 years. Before revaluation there is a further 6 months’ depreciation to charge (so $300 for that half year) and, as at 1 October it has been depreciated for 6 and a half years – thus leaving a remaining useful life of thirteen and a half years over which the revalued amount should be depreciated
And that works out to be $10,800 / 13.5 = $800 for each year and, for the second half year from 1 October 20X4 to the year end that would be $400
That gives a total of $300 + $400 = $700 for the year ended 31 March 20X5 and a figure for the SoFP of $10,800 – $400 = $10,400
Does that make sense – I hope it helps
In answer to your last post, no!
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