Depreciation-Pace Company-part (c)

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May 15, 2021 at 4:26 pm #620677
nguyentran78921
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My problem is related to F5 December 2008 question 1 part C – Pace Company.
In part C, the 2 last sentences stated that:
– “Store S requires an investment of $100,000 at the start of its first year of trading.”
– “PC depreciates non-current assets at the rate of 25% of cost. No residual value is expected on these assets.”
I checked the answer and it said:
2009 2010 2011 2012
Investment 100,000 75,000 50,000 25,000
Could you explain it to me: how to calculate the figure of investment in 2010, 2011 and 2012?
May 16, 2021 at 9:42 am #620723
John Moffat
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The investment is the book value (carrying value) of the investment on the SOFP in each of the 4 years.
Given that there is straight line depreciation of 25% x 100,000 = $25,000 per year, the book value will reduce by $25,000 each year as in Paper FA.
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