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P2-D2.
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alicechang0430
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1/4/2014- PPE at cost (20 year original life)- $12m
1/4/2014- Accumulated depreciation -$3.6m1/10/2014- Revalue PPE to $10.8m
Question: What is the depreciation charge in statement of profit or loss for the year ended 31 March 2015?
How to do this question?
P2-D2
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Hi,
The depreciation charge will be for the twelve months from 1 April 2014 to 31 March 2015.
From the 1 April 2014 to 1 October 2014 (date of revaluation) the charge will be based on the original cost of $12m over the 20 years and pro-rated for six months.
From 1 October 2014 to 31 March 2015 (reporting date) the charge will be based on the revalued amount of $10.8m over the remaining useful life. The difficulty is knowing the remaining life of the asset. Given the annual depreciation charge was initially $0.6m ($12m/20 years) and the accumulated depreciation at the start of the year was $3.6m, then we have used the asset for 6 years ($3.6m/$0.6m) at the start of the year. Given that the asset was revalued six months into the current year then we have used the asset for 6 years and 6 months, hence the are 13 years and 6 months left of the assets life. You can now use this figure to held calculate the depreciation for the second half of the year.
Give it a go and see how you get on.
Thanks
alicechang0430
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