PLANT,PROPERTY AND EQUIPMENT

10. Tibet acquired a new office building on 1 October 20X4. Its initial carrying amount consisted of: $000 Land 2,000 Building structure 10,000 Air conditioning system 4,000 ––––––– 16,000 ––––––– The estimated lives of the building structure and air conditioning system are 25 years and 10 years respectively. When the air conditioning system is due for replacement, it is estimated that the old system will be dismantled and sold for $500,000. Depreciation is time?apportioned where appropriate. ANSWERS A Six months’ depreciation is required on the building structure and air conditioning system. $000 Land (not depreciated) 2,000 Building structure (10,000 – (10,000/25 × 6/12)) 9,800 Air conditioning system (4,000 – (3,500/10 × 6/12)) 3,825 –––––– 15,625 Goodday, Pls i don't understand why the 3500 was used to calculate the depreciation. Why was the fair value of 500 deducted from the carrying value? I'll appreciate if you can explain.