- This topic has 3 replies, 2 voices, and was last updated 8 years ago by
.
- Posts
Hi Mike,
I would like to know why depreciation of the new engine and damaged engine are not pro- rated?
Question:
On 1 Oct X8 the aircraft suffered a bird strike accident which damaged on of the engines beyond repair. This was replaced by a new engine with a life of 36,000 hours at cost of 10.8million. The other engine was also damaged, but was repaired at a cost of 3million; however its remaining estimated life was shortened to 15,000hours.
The post-accident changes are deemed effective from 1 Oct 20×8.Workings:
Statement of Profit or loss(extract) for the year ended 31 March 20×9
Replaced engine:
Replacement: $’000
Cost 10,800
Depreciation to 31.3.×9 (10,800/36) (300)
Carrying amount 10,500Damaged engine: $’000
Carrying amount at 1.10.×8 6,000
Depreciation to 31.3.×9 (6,000/15) (400)
Carrying amount at 31.3.×9 5,600Hope to hear from you soon, thank you!
According to your post, both the new and the repaired engine were used for only 1 hour in the year to 31 October ‘X9
Is that really correct?
Hi Mike,
Thank you for your reply.
There is a note in the question: Further 1000 hours in the six months to 31 March 20×9.
The total depreciation in the working is in $’000, so it is $300,000 for the new engine, and $400,000 for repaired engine.
I understand now. Thank you, Mike!
- You must be logged in to reply to this topic.