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The following trial balance extract relates to a property which is owned by Veeton as at 1 April 2014:
Dr Cr $’000 $’000 Property at cost (20 year original life)12,000
Accumulated depreciation as at 1 April 2014 3,600On 1 October 2014, 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 2015?
A $540,000 B $570,000 C $700,000 D $800,000sir I did not understand the solution :
Six months’ depreciation to the date of the revaluation will be $300,000 (12,000/20 years x 6/12);
”six months’ depreciation from the date of revaluation to 31 March 2015 would be $400,000 (10,800/13·5 years remaining life x 6/12)”.
sir i did not understand this 2nd one calculation.Total depreciation is $700,000.
”six months’ depreciation from the date of revaluation to 31 March 2015 would beal sir i did not understand this calculation.
The year runs from 1 April 2014 to 31 March 2015
Depreciation for the period 1 April 2014 to 30 September 2014 is:
$12,000 / 20 for half a year = $300 and that property has now been depreciated for 6 years 6 months so has an estimated remaining usefulf life of 13.5 years
Revalued to $10,800 with no change in estimated remaining useful life means depreciation at $800 for a full year
Depreciation for the period 1 September 2014 to 31 March 2015 is:
$10,000 / 13.5 for half a year = $400
Better?
thank you sir. i had not understand that 6.5 yrs thingy earlier now i got it 🙂
sir i got confused on f7 revision question of PPE . question number 3. i got the answer 78000 but actual answer is 78500.
do I need to type the question?
Tell me the source of the question (course notes page number 215? December 2011 exam question 3? Kaplan page number 266?)
If I don’t have a copy of the source then, yes, you’re going to have to type it out – sorry
sir it is not from course notes. it is from separate heading ” f7 practise questions’ . IAS 16 . question number 3.
if this not sufficient , i will write whole question 🙂
Ok, it isn’t practice question number 3 – that question is called Gill and Job and has nothing to do with IAS 16 and is on page 252
WHAT’S THE PAGE NUMBER? What’s the question called?
on 1 may 2009, Perek plc acquired a major item of heavy machinery for 800,000. on 1 sept 2012, perek plc received notice that, following a change in legislation it was necessary to fit a safety guard on machine. the cost $40000 had an estimated useful life of 10 yrs. and no residual value at the end of machine’s useful life. machine itself is estimated to have a scrap value of 30000.
what amount of depreciation charged on Peek plc statement of profit and loss for the year end 30 nov 2012?
my solution:
depn = (800000-30000)/10= 77000 each year
depn in year end nov 2012 ( from dec 2011- nov 2012) = 77000
safety machine depreciation = 40000/10= 4000*3/12=1000
so total dep is 78000.but in ans it say 78500.
Does the question tell you the estimated useful life or depreciation rate for the machinery for the period since acquisition up to 1 September 2012?
$77,000 is the depreciation for the year on the original machine
The safety guard cost $40,000 and is fitted to the machine. When the machine reaches the end of its useful life, so too does the safety guard.
The machine has been in use for 40 months so has only 80 months more to live
Therefore we need to write the safety guard off over 80 months
Ok?
sir one doubt
The following trial balance extract relates to a property which is owned by Veeton as at 1 April 2014:
Dr Cr $’000 $’000 Property at cost (20 year original life)12,000
Accumulated depreciation as at 1 April 2014 3,600On 1 October 2014, 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 2015?
A $540,000 B $570,000 C $700,000 D $800,000sir I did not understand the solution :
Six months’ depreciation to the date of the revaluation will be $300,000 (12,000/20 years x 6/12);
”six months’ depreciation from the date of revaluation to 31 March 2015 would be $400,000 (10,800/13·5 years remaining life x 6/12)”.
sir i did not understand this 2nd one calculation.Total depreciation is $700,000.
”six months’ depreciation from the date of revaluation to 31 March 2015 would beal sir i did not understand this calculation.
Hi,
When the asset is revalued the revalued amount is depreciated over the remaining useful life. So here the revalued amount is 10,800 and the remaining life 13.5 years. The depreciation is then pro-rated as the revaluation took place part way through the year when there were six months of the year left.
Thanks
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