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depreciation charge clarification

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › depreciation charge clarification

  • This topic has 3 replies, 4 voices, and was last updated 5 years ago by phanngoctrong.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 28, 2016 at 8:18 pm #317826
    decent0013
    Member
    • Topics: 10
    • Replies: 13
    • ☆

    Q: Senakuta Co. purchased a machine with an estimated useful life of 5 years for $34,000 on 30 September 20×5. 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 20×8, 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 20×9?
    a. $7000
    b. $6800
    c. $2800
    d. $6400

    Ans: a. $7000
    carrying amount at 1.10×8: 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 1.10×8: (34000-4000) x 3/5 = $18000
    and then (18000-2000)/2 = giving you $8000 answer?

    May 28, 2016 at 9:50 pm #317837
    hakkha
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    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

    May 29, 2016 at 8:13 am #317880
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54829
    • ☆☆☆☆☆

    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 🙂

    September 16, 2020 at 9:01 am #585798
    phanngoctrong
    Member
    • Topics: 1
    • Replies: 3
    • ☆

    Hello,
    Could you explain why the time which had been charged is 3 years to 1 October 20X8 please? I think that the purchase day is the last day of 20X5, and to the first day of 20X8 which is just 2 years. I am very confused

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