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Hi John.
here is a question from the mock exam on this site:
On 1 Jan. Krin Co. brought a machine for $70,000. estimated useful life was seven years and residual value $7000. Two years later useful life was estimated at three years and at 31 December 2003 the machine was sold for 30,000. What was the profit on disposal?
I understand everything in the working out up to when the revised depreciation is 15000 per annum, but what i do not understand is why 15000 is subtracted twice rather than for one year only. the machine was brought at the beginning of 2000, two years later (2002) it was revised, and then one year later (2003) it was sold.
could you help me understand what I am missing here?
The machine was bought on 1 Jan 2000, so the first depreciation will have been charged at the end of 2000. The second depreciation will have been charged at the end of 2001. Then it was revalued. So the first depreciation at 15,000 will have been charged at the end of 2002, the second will have been charged at the end of 2003.
Then it was sold 🙂(The revaluation was at the beginning of 2002, and the sale was at the end of 2003)
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