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Hi can you please help me understand how the PUP, Non current assets in this question is calculated.
This question is from the Kaplan ST Chapter 19 TY 4.At the start of the year Papilla transferred a machine to Satago for $15000. The asset had a remaining useful life of 3 years at the date of transfer. It had a carrying amount of $12000 in the books of Papilla at the date of transfer.
The answer key also mentions that there is a profit element of $3000. Please explain it as well.
Thank you so much.Hi,
As the transfer took place during the year then there will be a profit on disposal (proceeds less CV) on transfer of the asset that is part of the PURP.
There will also be a difference in the depreciation charge that is now charged based on the $15,000 compared to what would have been charged on the $12,000 had it not been transferred.
Have a play with the numbers based on what I’ve said and see if you can get the answer. If not then please let me know and I can help further.
Thanks
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