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On 1 January 20X6 a company purchased an item of plant for $28000 including delivery costs of $2000. The installation cost incurred were $1200. During the first month of production the plant broke down and cost $1000 to repair. Depreciation is charged on a straight line basis over 8 years with no residual value. What is the carrying amount of the asset in the statement of financial position at 31 December 20X6?
The correct answer is : $25550
Can you please explain to me how to get the answerI have calculated the depreciation : ($28000 – $2000)/ 8 years = $3250. Then, $26000-$3250 = $22750, which is the wrong answer.
I would be very grateful if you can help me , sir.
You do exactly as you have written except that the cost to use should include installation costs of 1,200 – so the initial cost is 29,200.
I do explain that installation costs should be capitalised in my free lectures on non-current assets.
The lectures are a complete free course for Paper FA (F3) and cover everything needed to be able to pass the exam well.
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