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A business purchased an asset on 1 January 20X1 at a cost of $160,000. The asset had an expected life of eight years and residual value of $40,000. The straight line method is used to measure depreciation. The financial year ends on 31 December.
At 31 December 20X3 the estimated remaining life of the asset from that date is now expected to be more only three years, but the residual value is unchanged.
What will be the net book value of the asset as at 31 December 20X3 for inclusion in the statement of financial position.
A.$97,500
B.$100,000
C.$107,500
D. $115,000SIR CAN U PLEASE EXPLAIN THIS
Because when we come to calculate deprecation as at 31 December 20×3 we know what the remaining life is changed. Therefore we calculate the depreciation for 20×3 based on this new remaining life.
At the end of X2 there will have been 2 years depreciation at (160,000 – 40,000) / 8 = 15,000 per year. So the book value will be 130,000.
When we come to calculate the depreciation at the end of X3, we know there are 3 more years life left – so 4 years when we include X3.
So the new depreciation is (130,000 – 40,000) / 4 = 22,500 per year.
So the book value at the end of X3 = 130,000 – 22,500 = 107,500
sir i have a question on depreciation . the question is
Rookie bought a machine for $10,000on 1 January2015.He estimates a useful life of eight years and a residual value of $800. Depreciation is to be calculated on a straight line basis
Required:Write up for 2015 and 2016 the:
a)Machinery account
b)Accumulated depreciation account
c)Depreciation expense account.B)Show how the machine would be presented in the S.O.F.P as at 31 December2015 and 31 December 2016
There is no point is simply typing out a test question and expecting a full answer.
You must have an answer in the same book in which you found the question, and so you should ask about whatever it is in the answer that you are not clear about – then I will explain.
Have you watched my free lectures on depreciation (because what you are asking is very basic and is covered in detail in the lectures)?
The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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