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Subsequent cost if includes overhauling every 3 yrs…..does it mean we derecognize the previous amount of overhaul we did from original cost of asset like
Dr accumulated dep (by the overhauling amount)
Cr assetor we keep it in books and add the next overhauling cost upon the previous cost cause accumulated depreciation will take care of that.
Cause i read in complex asset…….if any part is replaced we derocognize the old part and put the new part in the cost. I mean we remove it from the book that thing,
and is the journal entry right when we are not selling the asset but removing from book
Cr asset
Dr Acc. depreciation
Dr. loss on disposalAs per kaplan book it says:
Subsequent expenditure on property, plant and equipment should only be
capitalised if:• it relates to an overhaul or required major inspection of the asset –
the costs associated with this should be capitalised and depreciated
over the time until the next overhaul or safety inspection• it is replacing a component of a complex asset. The replaced
component will be derecognised. A complex asset is an asset made
up of a number of components, which each depreciate at different
rates, e.g. an aircraft would comprise body, engines and interior.they used derocginition word in case of replacement of a component but not in overhauling…….so that means the overhauling cost gets added to the historical cost and its depreciatiated accordingly till next overhaul
am i right?
i read the kaplan book now…so i wanna confirm if i understood it right or not@sguha said:
Subsequent cost if includes overhauling every 3 yrs…..does it mean we derecognize the previous amount of overhaul we did from original cost of asset likeDr accumulated dep (by the overhauling amount)
Cr assetor we keep it in books and add the next overhauling cost upon the previous cost cause accumulated depreciation will take care of that.
Cause i read in complex asset…….if any part is replaced we derocognize the old part and put the new part in the cost. I mean we remove it from the book that thing,
Yes, it would be removed from the books.
@sguha said:
and is the journal entry right when we are not selling the asset but removing from bookCr asset
Dr Acc. depreciation
Dr. loss on disposalYes, we remove the cost and the accumulated depreciation. There shouldn’t be a loss if the asset has been correctly depreciated over the three years, as it would now have a nil carrying value.
@sguha said:
As per kaplan book it says:Subsequent expenditure on property, plant and equipment should only be
capitalised if:• it relates to an overhaul or required major inspection of the asset –
the costs associated with this should be capitalised and depreciated
over the time until the next overhaul or safety inspection• it is replacing a component of a complex asset. The replaced
component will be derecognised. A complex asset is an asset made
up of a number of components, which each depreciate at different
rates, e.g. an aircraft would comprise body, engines and interior.they used derocginition word in case of replacement of a component but not in overhauling…….so that means the overhauling cost gets added to the historical cost and its depreciatiated accordingly till next overhaul
am i right?
i read the kaplan book now…so i wanna confirm if i understood it right or notYes, you’re right.
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