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depreciation charge clarification

Ddecent001310y ago
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?
Hhakkha10y ago#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
John MoffatJohn MoffatTutor10y ago#2
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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