Revision Kit Elite Leisure Co Question 59-63

Sir, this is the question is asking to calculate the amount ignoring depreciation at the year end 30 September 2005?

In the answer I don’t quite understand why they have ignored the facility upgrade cost and how they have disposal?

Elite Leisure Co case
The following scenario relates to questions 59-63.

Component

Depreciation basis

Ship’s fabric (hull, decks etc)
Cabins and entertainment area fittings

Propulsion system

(18 mins)

Elite Leisure Co is a private limited liability company that operates a single cruise ship. The ship
was acquired on 1 October 20W6 (ten years before 20X6). Details of the cost of the ship’s
components and the basis on which they are depreciated is as follows:

Original cost
$m

300

150

100

At 30 September 20X4 no further capital expenditure had been incurred on the ship.
The propulsion system has been used for 30,000 hours at 30 September 20X4. Due to the
unreliability of the engines, a decision was taken in early October 20X4 to replace the whole of
the propulsion system at a cost of $140 million. The useful life of the new propulsion system was
50,000 hours and, in the year, ended 30 September 20X5 the ship had used the system for 5,000
hours.

25 years straight-line

12 years straight-line
Useful life of 40,000 hours