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Hello sir
It’s not very clear to me the part of question 38.9 BPP revision kit about depreciation, why is depreciation higher in earlier years, i think it is lower and by the last years it increases as the asset gets older?
Question 34.6 BPP rev kit could you please make a brief explanation about the net new rental cost why that figures, because i was thinking it should be 17000-2000 =15000 as we save 2000 with the new price and the net cost reduces
many thanks in advance
Depreciation is normally either straight line (and therefore the same each year) or more commonly reducing balance (which is higher in early years and lower in later years). For an explanation of reducing balance depreciation you need to watch the Paper F3 lectures on methods of calculating depreciation, because this a basic financial accounts topic.
They will be paying rent of $5,000 whether or not they take on the new project, and so this is fixed and is irrelevant.
Taking on the new project will involve paying 17,000 for the bigger factory but earning 3,000 for the old – so the extra cost is a net 14,000.
It would appear that you are using an old edition of the Revision Kit. This is no problem because the syllabus has not changed, but be aware that the format of the exam has now changed (with more MCQ’s and fewer long-form questions). There is a specimen exam on the ACCA website.
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