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Depreciation charge

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Depreciation charge

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • August 10, 2023 at 1:58 pm #689679
    Aynur02
    Participant
    • Topics: 17
    • Replies: 18
    • ☆

    The following trial balance extract relates to a property which is owned by Veeton as at
    1 April 20X4.
    Dr Cr
    $000 $000
    Property at cost (20 year original life) 12,000
    Accumulated depreciation as at 1 April 20X4 3,600
    On 1 October 20X4, 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 20X5?
    SOLUTION: Six months’ depreciation to the date of the revaluation will be $300,000 (12,000/20 years × 6 /12). Six months’ depreciation from the date of revaluation to 31 March 20X5 would be $400,000 (10,800/13.5 years remaining life × 6 /12). Total depreciation is $700,000.

    Sir, I dont understand how we can find 13,5 years or where we found 6.5 years for calculation?

    August 11, 2023 at 5:11 pm #689761
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    The 0.5 years comes from the period 1 April X4 to 1 October X4, which is six months.

    The rest of the figure comes from using the original life of the asset of 20 years and its cost of 12,000 alongside the accumulated depreciation to 1 April X4. The annual depreciation charge is 12,000/20 = 600. There will have been six years of depreciation charged if the accumulated depreciation is 3,600 (3,600/600). So, there have been 6.5 years since the date the asses was acquired and if the total life is 20 years there are 13.5 years left (20 – 6.5).

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