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Sir, this question is from mini exercises.
During the year S sold PPE to H for $65,000.
cost of PPE: $100,000 ,4 yrs ago and it’s useful life of 9 yrs.
Estimated scrap proceeds of $10,000 were revised on transfer to H to $20,000.
Straight line basis for depreciation with a full year’s charge in the year of purchase and none in the year of sale.How do I deal with the scrap proceeds?:)
Deduct from carrying value to determine how much of the carrying value needs to be depreciated over the revised estimated useful life
At date of transfer it had a carrying value of $60,000
Sold for $65,000
Scrap value now $20,000
So $45,000 to depreciate
Estimated useful life 5 years
So depreciation now $9,000 per annum
That compares with $10,000 per annul before the transfer.
Pup to be eliminated: $5,000 on the transfer less $1,000 depreciation
If it hadn’t been transferred, carrying value would have been $52,000 (60 – depreciation on 60 – 20)
After transfer carrying value is $56,000 (65 – depreciation on 65 -20)
Ok?
so, scrap value should be deducted from both 60 and 65.
and
when I do the CSofFP, I can just calculate pup in this way:
5,000/5(1,000)
_______4,000
right? ‘cuz it’s what you are suggesting in the lecture.:)
Sir, Can I really really write down the same abbreviations as in your lecture?like ret ears/pup/rev/pat..etc, because I am only using opentuition.com and BPP revision kit to help with my exam, I need to be 100% sure:) Thank you!!!
100% certain – abbreviate in the numbers answers (but, if you have to write to someone like in a report or a letter, don’t abbreviate there)
Yes, we need to deduct the scrap estimate from both the 60 and the 65
sir, can I write this down in my answer paper?
PUP:
5,000/5(1,000)
_______4,000
or I need to calculate it in details?
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