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elvira02
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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.
How is 13.5 years
P2-D2
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Hi,
You have to work out how many years of depreciation have already been charged based upon the accumulated depreciation of $3,600.
One year worth of depreciation is $12,000/20 years = $600.
As $3,600 has been accumulated then 6 years of depreciation must have been charged ($3,600/$600), and hence 14 years remaining at the start of the financial year.
As the asset is revalued after 6 months of the financial year then there will be a remaining useful life of 13 years and 6 months (i.e. 13.5 years).
Hope that helps.
Thanks
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