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Tangible Non-current assets

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Tangible Non-current assets

  • This topic has 2 replies, 2 voices, and was last updated 7 years ago by Avatarunibuti.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • December 15, 2018 at 4:23 pm #492039
    Avatarunibuti
    Member
    • Topics: 12
    • Replies: 8
    • ☆

    Dear Sir,
    Could you please explain to me the answer to this question?

    Tibet acquired a new office building on 1 October 2014. Its initial carrying amount consisted of:

    $’000
    Land 2,000
    Building structure 10,000
    Air conditioning system 4,000
    Total 16,000
    The estimated lives of the building structure and air conditioning system are 25 years and 10 years respectively.

    When the air conditioning system is due for replacement, it is estimated that the old system will be dismantled and sold for $500,000.

    Depreciation is time apportioned where appropriate.

    At what amount will the office building be shown in Tibet’s statement of financial position as at 31 March 2015?

    $’000

    A
    15,625

    B
    15,250

    C
    15,585

    D
    15,600

    The aswer is A:
    Six months’ depreciation is required on the building structure and air conditioning system.

    $’000
    Land (not depreciated) 2,000
    Building structure (10,000 – (10,000/25 x 6/12)) 9,800
    Air conditioning system (4,000 – (3,500/10 x 6/12)) 3,825
    Total 15,625

    So why is the depreciation of Air conditioning is calculated based on the cost of 3500, not 4000?

    December 17, 2018 at 6:17 pm #492132
    AvatarP2-D2
    Keymaster
    • Topics: 4
    • Replies: 7232
    • ☆☆☆☆☆

    Hi,

    Straight line depreciation depreciates the depreciable amount over the life of the asset. The depreciable amount is the cost less the residual value, and here we are given the residual value of 500, hence the depreciable amount is 3,500 (4,000 – 500).

    Thanks

    December 19, 2018 at 7:16 am #492290
    Avatarunibuti
    Member
    • Topics: 12
    • Replies: 8
    • ☆

    I understood. Thank you so much !

  • Author
    Posts
Viewing 3 posts - 1 through 3 (of 3 total)
  • The topic ‘Tangible Non-current assets’ is closed to new replies.

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