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Tibet acquired a new office building on 1 October 2014.
Its initial carrying amount consisted of:
$’000
Land 2,000
Building structure 10,000
Air conditioning system 4,000
–––––––
16,000
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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.
At what amount will the office building be shown in Tibet’s statement of financial position as at 31 March 2015?Answer shows
(4000-(3500/10*6/12=175)=3825why we deduct 500 from 4000 and depreciate and starting to depreciate it from 3500?
I do not building explanation.
What can you say about this exercise?I saw this post somebody also posted but i could not find it.
This is, again, F3
Did you ever follow my advice and watch John’s F3 lectures
We depreciate an asset over its estimated useful life taking into account the residual value of that asset
This air-conditionng system cost $4,000 but will have a residual sale value at the end of its useful life of $500 so we need only depreciate it by $3,500 over the 10 years at the rate of $350 per annum
And since this first period is only half a year, depreciation this half year is $350 / 2 = $175
OK?
It’s not too late to watch John’s lectures and it will save you a lot of time typing out these questions!
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