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In continuation of above subject, are you saying that under the straight line method the lease asset that had cost of $20m and accumulated depr of $5m means that the lease asset will be charged based on the cost or CA?
This means $5m each year and every year will be deducted ?
If I lease an asset that has a useful years of 4 and I use straight line method . The cost of the asset was $20m but already had acc dep of $5m.
Then it will be $20m/4 = $5m each yr.
Meaning each yr I will be charging $5m until 4 years?
But the question never said use straight line method as depreciation rate is 25% pa. Am I supposed to have used straight line ?
This is what the question said:
“Leased plant is depreciated at 25% per annum using the straight-line method”
OK?
No. It only made mentioned of owned plant to be depreciated using reducing bal at 25%.
Then that depends upon which version of the question you are looking at!
This is the third paragraph of note (i) of the ACCA’s website version of Pricewell:
“The leased plant was acquired on 1 April 2007. The rentals are £6 million per annum for four years payable in arrears on 31 March each year. The interest rate implicit in the lease is 8% per annum. Leased plant is depreciated at 25% per annum using the straight-line method.”
and here’s the link:
“https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/f7uk_2009_jun_q.pdf”
OK?
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