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Hi,
Could you please help me with this short FV adjustment?
On 1 Jan 20X7 Hardy owned items of equipment with a book value of $45m that had a fair value of $57m. These assets were orginally purchased by Hardy on 1 Jan 20×5 and are being depreciated over 6 years.
In this question the statement of financial position was at 31 Dec 20X9.I understand that I have to deal with 12m extra FV adjustment (57-45) but don’t understand why in the answer extra depreciation is calculated as $12m x 3/4 =9m. Why 3/4?
Kind regards
Alicia
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i think its because on 01/01/20×7, the building has already been depreciated for 2yrs our of the UEL of 6yrs… ie from 20×5-20×6…. there for the remaining number of years the building is now depreciated is 4yrs……if the statement of financial position was at 31 DEC 2009, then this will mean 3yrs out of the 4yrs remaining….. ie 20×7 to 20×9.
6yrs of depreciation suld be as follows
year 1… 20×5
year 2… 20×6
year 3… 20×7
year 4…20×8
year 5…20×9
year 6…2010
hope this is wright…..Your logic is better than your spelling! Wright?
And your answer is correct – it’s three years out of the four years remaining after the revaluation
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