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Question. ((Do we capitalise the cost of long leasehold property))
If no, then how we can charge depreciation of restaurant that hold a 25 year lease.? This is an example mention in F3 but I studied in FA1 that rent of long leasehold property is revenue expenditure then how it’s capitalised here???
ThanksThere can ve two elements to a lease:
1 An up-front capital payment to acquire the lease. This is capitalised and amortised/depreciated over the life of the lease.
2 Sometimes there is also a (usually) small ground rent to pay each year. This is an annual expense.
The net book value of a company’s non-current assets was $200,000 at 1 August 20X2.During the year ended 31 July 20X3,the company sold fixed assets for $25,000 onwhich it made a loss of$5,000.
The depreciation charge for the year was $20,000.What was the net book value of fixed assets at 31July 20X3?
Can you answer this please.Proceeds from sale = 25,000 and a loss of 5,000 was made, so the NBV of the assets sold must have been 30,000
So, the closing NBV must be: 200,000 – 30,000 – 20,000 (charge for the year) = 150,000.
Accumulated depreciation for an asset is the total amount of depreciation that has been ‘clocked up’ by the asset so far.
So, if an asset cost $12,000 and was being depreciated straight line at 25%, after three years the accumulated depreciation would be $9,000 (ie $3,000pa for three years).
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