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June 2006 wear wraith

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › June 2006 wear wraith

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by Ken Garrett.
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  • November 17, 2015 at 7:54 am #283229
    saifudeen
    Member
    • Topics: 85
    • Replies: 85
    • ☆☆

    Hi sir ,
    In the above question i completly didnt understood about motor vehicle answer given in revision kit.
    Can you explain it to me please.

    November 17, 2015 at 8:10 am #283236
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10193
    • ☆☆☆☆☆

    I’m not sure which revision kit you are using but abyhow, the mpoint about the motor vehicles is as follows:

    We are told they are depreciated at 33% so the assumption is a 3 year useful life. However:

    1 We are also told that the motor vehicles are sold after 5 years. Therefore there is an inconsistency. If the vehicles last for 5 years the depreciation rate should be 20% pa.

    2 There might also be a problem with the depreciation charge. The cost at 31/5/20X6 is 1,700,000 and the depreciation charge for the year is 425,000 ie 25%. Of course the charge shold be lower than 33% because some of the vehicles will probably be fully depreciated if they are usually kept for 5 years. However 25% is a very round nnumber and they might simply have applied 25% to the closing cost balance. It certainly needs investigation. So:

    Company says depreciation rate is 33%
    Looks as though 25% has been applied
    Looks as though 2-% would be more appropriate.

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