- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
Accumulated amortization/depreciation at 1 April 2013:
leased property 25,000
plant and equipment 43,500
Plant and equipment is depreciated at 12½% per annum on the reducing balance basis.
All amortization/depreciation of non-current assets is charged to cost of sales.Well when charging the yearly depreciation of plant and equipment the examiner first deducted the accumulated depreciation of 43500 from cost and then applied the depreciation percentage.But when charging the yearly depreciation ,the accumulated depreciation was not deducted from cost and the yearly depreciation charge was applied for the year ended 31 march 2014.
On the other hand when leased property was shown in the statement of financial position the accumulated depreciation was deducted from the cost to show the non current asset at carrying value.Well is the depreciation treatment for leased property is different according to IAS 17?
You haven’t given me a reference so I can’t check
However, I think that you’ve probably confused the (more common) two bases for calculating depreciation … straight line and reducing balance
(Forgive me if I’m wrong with this guess)
Let’s say that the cost of both the leased property AND the plant and machinery had both got an historic cost of $100,000 and that the property is being depreciated at the rate of 5% per annum on a straight line basis
At the start of the year therefore, leased property would show on last year’s statement of financial position as $75,000 ($100,000 – $25,000)
and PPE would show as $56,500 ($100,000 – $43,500)
Depreciation for this year on the property would be $5,000 (5% * $100,000) giving accumulated depreciation on the property of $30,000 and a net figure for the statement of financial position of $70,000
Depreciation for this year on the plant would be $7,062 (12.5% * $56,500 (100,000 – 43,500)) giving accumulated depreciation on the plant of $50,562 ($43,500 brought forward + $7,062 for this year) and a net figure for the statement of financial position of $49,438 ($100,000 – $50,562)
“Well is the depreciation treatment for leased property is different according to IAS 17?”
No! It’s (probably) simply the difference between straight line depreciation and reducing balance depreciation … have you misinterpreted the question when it said that plant and equipment is depreciated at 12.5% reducing balance and maybe you’ve assumed that that sentence applied also to property?
OK?
- The topic ‘Leased property accumulated depreciation’ is closed to new replies.