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On 1 Jan 2008 wootton has a building in its books which cost $380,000 with a carrying amount of $260,000. On 1 july 2008 , the asset was valued at $450,000 and wootton wishes to include that valuation in its books. Wootton’s accounting policy is to depreciate buildings at the rate of 3% on a straight-line basis.
what was depreciation charge included in the statement of profit or loss for the year ended 31 December 2008?
Sir in here as i re-watched your lectures on depreciation..
6/12 x 380,00 x 3/100 = 5700…but half year i cant understand from the book kaplan answer..
dont understand thiss..pls tell me an easier way
Accumulated depreciation at date of revaluation =120,000+5700=125,700-ie 11.03 years have passed
Total estimated useful life is 33.33years, with a remaining estimated useful life of 22.3 years. Thus depreciation for second half of year =450,000/22.3 years X 6/12 =10,090
the total depreciation charge for the year 5700+10,090=15,790.
sir i dont get thiss please explain me with your easy method ..that i can remember in the exam as well..how all of a sudden they are bringing years to it..The accounting year is 1 Jan to 31 Dec.
The revaluation took place on 1 July. Between 1 January and 1 July is six months, which is half of a year.
The depreciation is 3% straight line. This is the same as spreading the cost over 100/3 = 33.33 years.
sir i don’t understand it ? okay after 33.33 what to do? what is the concept actually? how 11.03 came? how to find out depreciation for second half of the year?
The original useful life was 33.33 years. It is revalued after it had been owned for 11.03 years.
Therefore after the revaluation there are 33.33-11.03 = 22.3 years life remaining. Therefore the revalued amount will be depreciated at the rate of 450,000/22.3 per year, so for half a year yo take 1/2 of this figure.The accumulated depreciation at the date of the revaluation was 380,000 – 260,000 = 120,000 + 5,700 = 125,700.
The depreciation per year was 3% x 380,000 = 11,400.
Therefore the building must have been owned for 125,700 / 11,400 = 11.03 years
The accounting entry for depreciation is credit the depreciation account and debit the overhead account
Normally depreciation is an expense so we should do Dr depreciation but i am. Solving a question where they are crediting depreciationDr production overhead
Dr administration overhead
Dr sales and distribution overhead
Cr equipment depreciation accountWithout seeing the particular question, it would appear that they have charged the total depreciation on all of the equipment to then equipment depreciation account.
The entry that you have typed out is then taking the total depreciation and charging it to the individual departments where individual bits of equipment are being used.
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