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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Depreciation
Good Day Tutor,can you assist me solve below question
John bought a factory on 1 Jan 20×3 for $180,000.It is depreciated monthly on a straight line method useful live 50 .On 1 July 20×6 the factory was revalued $223,200.
What should the depreciation charge be for the year ended 31 Dec 20×6?
The new depreciation for the second six months of the year will be based on the revalued amount and (unless told different) you would assume that the useful life remained unchanged and you would therefore divide by 46.5 years (because it had already been used for 3.5 years) to get the new annual rate of depreciation.
Hi Mr. Moffat. I have a question in regards to Kaplan exercise.
At January 2005, Mary has motor vehicles $15,000. On 31 Aug 2005, she sells a motor vehicle for $5,000 which had originally cost $8,000 and which had a CV of $4,000 at the date of disposal. She purchased a new motor vehicle which cost $10,000 on 30 Nov 2005.
Her policy is to depreciate motor vehicles at a rate of 25% pa on the straight-line basis, based on the number of months’ owned.
What is the depreciation charged for the year 31 Dec 2005?
The right answer is given to be $3,291.
According to my calculations:
1 jan to 31 Aug: 15,000*0.25*8/12 = 2,500
1 Sep to 30 Nov = (15,000-4,000)*0.25*3/12 = 687.5
1 Dec to 31 Dec = 10,000*0.25/12 = 208
Total = 3,396
Where is my mistake please??
Since the depreciation is 25% straight line, it is 25% of cost.
Therefore, the calculation from 1Sep to 30 Nov should be based on a cost of 15,000 – 8,000 = 7,000.
Also, the calculation from 1 Dec to 31 Dec should be based on a cost of 7,000 + 10,000 = 17,000.