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Senakuta Co. purchased a machine with an estimated useful life of 5 years for $34000 on 30/9/05. Senakuta Co. planned to scrap the machine at the end of its useful life & estimated that the scrap value at the purchase date was $ 4000. On 1/10/08, Senakuta revised the scrap value to $ 2000 due to the decreased value of scrap metal.
What is the depreciation charge for the year ended 30/9/09?
A. $ 7000
B. $ 6800
C. $ 2800
D. $ 6400Dear Sir,
I have another confusion. Pls help me solve this question as well.
Banter Co. purchased an office on 1/1/01. The building cost was $1,600,000 and this was depreciated by the straight line method. at 2% per year, assuming a 50 year life and nil residual value. The building was re-valued to $ 2,250,000 on 1/1/06. The useful life was not revised. The company’s financial year ends on 31 Dec.
What is the balance on the revaluation reserve at 31/12/06?
A. $ 650,000
B. $ 792,000
C. $ 797,000
D. $ 810,000I have told you before – you must ask in the Ask the Tutor Forum if you wish me to answer.
Also, please do not simply set questions. You must have answers in the book in which you found the questions, so say what problem you are having with the answer.
Good morning Sir,
Please I need your clarification with this question.
Banter Co purchased an office building on 1 January 20X1. The building cost was $1,600,000 and this was depreciated by the straight line method at 2% assuming a 50 yrs life and nil residual value. The building was revalued to $2250,000 on 1 Jan 20×6. The useful life was not revised. The company financial year ends on 31 Dec.
What is the balance on the revaluation reserve at 31 December 20X6?
A $650,000 B $792,000 C $797,000 D $810,000
The answer to the question from BPP was B while mine is D. From the solution given, I realised the excess depreciation of $18,000 was transferred from revaluation reserve to retained earning I.e $810,000-$18,000. Which reduced the balance on the revaluation reserve
My question is, in theory, should we always assumed that excess dep’n should be transferred because the question did not state that and I read somewhere that some company does not do the transfer?
Thank you.
My understanding according to IAS 16 is that entity are allowed to transfer the excess depreciation to retained earning, IF THEY WISH tO DO SO. In exam question, how are we to know weather to transfer or not.
Thank you for your time
You are correct – they do not have to make the transfer, and in the real exam you will have to be told whether or not they do.
My sincere appreciation to Sir Moffat for all the great lectures on F3. I did my F3 yesterday and pass with 73%. I am so greatful for the time you spared to answer all my posted questions and the clarification. They are much appreciated, thank you Sir.
Have a question that I will like help with:
Non-current assets: tangible
The Investment property was acquired on 1 January 2010. The company’s policy is to revalue investment property at each year end and at 31 December 2016 it was valued at $61.5 million. Ignore deferred tax on the revaluation.On 1 July 2016 an item of plant was disposed of for $10 million cash. The proceeds have been treated as sales revenue. The plant is still included in the above trial balance with at its opening cost of $28 million and accumulated depreciation of $20 million.
T.B
Investment property-at valuation 1 January 2016 Dr 58,700million
Plant and equipment-at cost Dr 88,600 million
Plant and Equipment accumulated depreciation at 1 January 2016 Dr 33,400 millionYou must surely have an answer in the same book in which you found the question. You should ask whatever it is in the answer that you are not happy with and not simply set a test question and expect a full answer.
You have not said what the question is asking for. Of course the sale proceeds should not have been treated as sales revenue but should have gone to a disposal account.
My lectures on depreciation go through the necessary entries on the disposal of an asset.
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