F7: SIMPLE TEST 1. An asset was purchased for $80,000 on 1 January 2008 when its useful life was estimated to be ten years with a residual value of $10,000. A straight line depreciation policy was selected. On 1 January 2014 the directors reviewed the useful life of the asset and found that it had a remaining life of eight years. Required: What will the depreciation charge be for the year ended 31 December 2014? 2 . An asset was purchased for $80,000 on 1 January 2009 when its useful life was estimated to be ten years with a residual value of $10,000. The depreciation policy of 20% reducing balance was selected. On 1 January 2014 the directors have now decided that to give a fair presentation a depreciation policy of straight line over the useful economic life should be followed. There has been no change in the estimated useful economic life of the asset as a result. Required: What would be the depreciation charge for the year ended 31 December 2014? 3. Horse bought an item of plant on 1 January 2010 for $50,000. The plant had an estimated useful economic life of five years with no residual value. A straight line method of depreciation was adopted. On 1 January 2012 Horse decides to revalue its plant to $60,000 in line with IAS 16. The useful economic life is unchanged. Required: Show how the revaluation would be accounted for and the subsequent depreciation calculation following the revaluation.
Posted on: Sun, 17 Aug 2014 20:02:29 +0000
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