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Depreciation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Depreciation

  • This topic has 6 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • October 17, 2015 at 7:11 pm #276917
    racucamelia
    Member
    • Topics: 34
    • Replies: 39
    • ☆☆

    Hi John,

    I had in exam (which I failed) the next question.
    An asset has value of 50000 $, a residual value of 1000$ and an useful life of 7 years. It was bought at 01.04.20×5. It is depreciated straight line with 25% in the year of acquisition and in the year of disposal.
    At 30.09.20×8 it is revalued at 41000$. No changes in the remaining life.
    What is the amount charged in P&L at 31.12.20×8?

    Thank you,
    Camelia

    October 18, 2015 at 7:26 am #276946
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Are you sure you are remembering the question correctly, because it makes no sense to depreciate 25% straight line in the year of acquisition and the year of disposal – that just would not happen 🙂

    October 18, 2015 at 9:38 am #276957
    racucamelia
    Member
    • Topics: 34
    • Replies: 39
    • ☆☆

    Yes, I remember correct because it was one of the questions that still haunting me after the exam. 🙂 And I don’t remember to practice something like that in exam kit.

    I simply didn’t know how to solve it.

    Kind regards,

    camelia

    October 18, 2015 at 10:12 am #276962
    racucamelia
    Member
    • Topics: 34
    • Replies: 39
    • ☆☆

    My mistake. You are right. It was not specified that depreciation of 25 % straight forward. Only the usefull years and the residual value.

    But I still blocked and I didn’t know how to solve it on the moment.

    Thank you,

    camelia

    October 18, 2015 at 11:19 pm #277091
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    At first the annual depreciation will have been (50,000 – 1,000) / 7 = 7,000.

    So, the depreciation in year ended 31.12.X5 will be 9/12 x 7,000 = 5,250
    In X6 it will be 7,000
    in X7 it will be 7,000
    In X8, up to 30.9.X8 it will be 9/12 x 7,000 = 5,250

    At 30.9.X8 it is revalued at 41,000. They have owned it for 3.5 years, and therefore the remaining life will be 7 – 3.5 = 3.5 years.

    So the annual depreciation from then on will be (41,000 – 1,000) / 3.5 = 11,429

    So the depreciation for the part of X8 since the revaluation will be 3/12 x 11,429 = 2,857

    So the total depreciation for X8 will be 5250 + 2857 = 8107

    (You had better check my arithmetic – I have just got back from a few days vacation and it is very late 🙂 )

    October 19, 2015 at 5:02 am #277253
    racucamelia
    Member
    • Topics: 34
    • Replies: 39
    • ☆☆

    Thank you so much for the answer. 🙂

    October 19, 2015 at 9:06 am #277361
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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