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ON OPEN TUITION REVISION NOTES PLEASE REFER TO THE QUESTIONS OF DEPRECIATION (QUESTION 2 (B)). HOW IS THE ANSWER OF OPEN TUITION FOR REVALUATION RESERVE AS AT 31.DEC.2011 £195,000? THE ORIGINAL COST DEPRECIATION IS SHOWN AS £120,000/30 TO GET £4000. HOW IS THIS CALCULATION COMING? PLEASE EXPLAIN. THE ORIGINAL COST WAS £20000 THEN HOW DID IT BECOME £120,000 AND THE ORIGINAL USEFUL LIFE WAS 50 YEARS THEN WHY IS THE CALCULATION DIVIDING BY 30 YEARS. SHOULDN’T THE ORIGINAL COST DEPRECIATION BE 20,000/50? TO GET 400?
PLEASE REPLY ASAP. I HAVE AN EXAM TOMORROW. THANKS.
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https://opentuition.com/forums/forum-rules/Sorry – there is an error in the answer – I will have it corrected.
The depreciation based on the original cost should indeed be 400 (2% of 20,000) and not 4,000.
Because of this, the amount transferred from the revaluation reserve should be 7,000 – 400 = 6,600.
This would give a balance remaining on the revaluation reserve of 198,000 – 6,600 = 191,400.
Sorry about that 🙁
<cite> @johnmoffat said:</cite>
Sorry – there is an error in the answer – I will have it corrected.The depreciation based on the original cost should indeed be 400 (2% of 20,000) and not 4,000.
Because of this, the amount transferred from the revaluation reserve should be 7,000 – 400 = 6,600.
This would give a balance remaining on the revaluation reserve of 198,000 – 6,600 = 191,400.
Sorry about that 🙁
Thank you for clarifying. However, the accruals of rent (in the accruals question) at the end of the year should be £12,000 and not 6000, so correct this too, please.
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