Q: Senakuta Co. purchased a machine with an estimated useful life of 5 years for $34,000 on 30 September 20x5. Senakuta Co. planned to scrap the machine at the end of its useful life and estimated that the scrap value at the purchase date was $4000. On 1 October 20x8, Senakuta revised the scrap value to $2000 due to the decreased value of scrap metal.
what is the depreciation charge for the year ended 30 September 20x9?
a. $7000
b. $6800
c. $2800
d. $6400
Ans: a. $7000
carrying amount at 1.10x8: 34000 - ((34000-4000) x 3/5) = $16000
Revised depreciation charge: (carrying amount - revised residual value / remaining useful life) = (16000 - 2000)/2 = $7000
My doubt is why in carrying amount 34000 is subtracted from the bracket value where already 34000 is specified & subtracted from 4000.
To my understanding, it should be only the bracket value which should give you $18000
i.e. carrying amount at 1.10x8: (34000-4000) x 3/5 = $18000
and then (18000-2000)/2 = giving you $8000 answer?
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depreciation charge clarification
Since depreciation has already been charged for 3 years the balance net book value for Oct-Sept 2009 was 34000-18000=16000
Now since residual value is 2000, we need to calculate 16000-2000=14000 as the value which needs to be depreciated for remaining 2 years. So 7000 is the answer
hakkha: Please do not answer in this forum - it is Ask the Tutor Forum, and you are not the tutor :-)
(but please do help people in the other F3 forum)
decent0013: What hakkha has written is correct :-)
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