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related to tangible non-current assets

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › related to tangible non-current assets

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 29, 2021 at 12:25 pm #619174
    deekshabee
    • Topics: 24
    • Replies: 20
    • ☆

    The following trial balance extract relates to a property which is owned by Veeton as at
    1 April 20X4.

    Dr. Cr
    $000 $000
    Property at cost (20-year original life) 12,000
    Accumulated depreciation as of 1 April 20X4 3,600

    On 1 October 20X4, following a sustained increase in property prices, Veeton revalued its
    property to $10.8 million.
    What will be the depreciation charge in Veeton’s statement of profit or loss for the year
    ended 31 March 20X5?
    $_____________ ,000

    solution given:
    $700,000
    Six months’ depreciation to the date of the revaluation will be $300,000 (12,000/20 years
    × 6/12). Six months’ depreciation from the date of revaluation to 31 March 20X5 would be
    $400,000 (10,800/13.5 years remaining life × 6/12). Total depreciation is $700,000.

    now, my question is why have they used 13.5yrs here instead of 19.5 yrs?

    April 29, 2021 at 9:13 pm #619228
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Hi,

    The asset was not bought six months ago, it has been owned a lot longer than that. We can work out how long ago through the accumulated depreciation charge of 3,600. If the annual depreciation charge is 600 then there must have been 6 years worth of depreciation charged since acquisition (3,600 / 600), meaning that at the start of this year there were 14 years left of the asset’s life.

    If we have charged six months of depreciation this year prior to the revaluation then there will be 13.5 years left (14 years less 6 months) as the remaining useful life. A tricky question for sure!

    Thanks

    April 30, 2021 at 11:20 am #619279
    deekshabee
    • Topics: 24
    • Replies: 20
    • ☆

    Thank you so much. You’re the best.

    May 1, 2021 at 1:02 pm #619370
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Thank you!

  • Author
    Posts
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