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question 2
S sold PPE to H for $65,000. It cost $100,000 when new 4 years ago and its useful life of 9 years has not changed.Estimated scrap proceeds of $10,000 were revised on transfer to H to $20,000
I cant see how in the answers depreciation is $40,000
useful life is 9 years so if you decide by the 9 years then for 4 years we get $44,444.
Also do we ignore the scrap value when calculating depreciation.Were you exempt F3?
The depreciation for each year before the transfer from S to H was calculated as:
($100,000 cost – $10,000 scrap) / 9 years estimated useful life = $10,000 per annum
“It cost $100,000 when new 4 years ago” so, at the rate of $10,000 per annum, that’s how we arrive at $40,000
OK?
NB If you were exempt from F3 I think that it would be highly beneficial for you to watch John’s lectures and you’ll see that these points are covered by him in those lectures
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