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-   -   Disposal and revaluation increments and decrements (https://www.askmehelpdesk.com/showthread.php?t=225243)

  • Jun 10, 2008, 05:42 AM
    vazzy
    Disposal and revaluation increments and decrements
    on 1 January, Dense Ltd bought a machine for $33000 cash: its useful life was 12 years and its residual value was $3000. It was decided to depreciate the machine by the straight-line-method.

    On 30th September 2006, the machine was traded in to Thicket Ltd for a new model, the total cost being $25000. Thicket Ltd allowed $17000 for the old machine. It was decided to depreciate the new machine at the rate of 45% p.a by the diminishing- balance method. Residual value of the new machine was $7000.

    on 1st July 2007, the company decided to adopt the revaluation model and revalue its machine upwards to reflect fair values. This represented a 15% increase in the carrying amount of the machine. The diminishing- balance method of depreciation was continued at the same rate. The accounting period ended on 30 June each year.At 30 June 2008, the carrying amount of the machine was approximately equal to fair value.

    A. prepare relevant ledger accounts to record the above transasctions up to 30 June 2008.Ignore GST

    okay this is as I far as I got with the question.
    I worked out the depreciation expense per annum which is:

    33000-3000= 30000
    30000\12=2500

    the figure for accum depreciation is 6875:

    Accumulated Depreciation – Machinery
    30/9/06 Asset. $6 875 30/6/04 Depreciation $1 250
    30/6/05 Depreciation 2 500
    30/6/06 Depreciation 2 500
    30/9/06 Depreciation 625
    6 875 6 875
    30/6/07 Depreciation (45% x
    1/7/07 Machinery 8 438 $25 000 x 9/12) 8 438
    30/6/08 Depreciation (45% x $19 046) 8 571


    I'm not sure how they got 1250 and 625? That whole thing just confused me?

    any help would be appreciated
  • Jun 11, 2008, 09:47 PM
    morgaine300
    It would have helped a lot if you'd included the year on the initial purchase.

    They purchased the machine on Jan 1, and their fiscal year ends on June 30. So for the first year, that's only a half year of depreciation. i.e. your 2500 annual rate divided by 2.

    Then the last depreciation was done as of June 30 of 2006. The machine was traded on Sept. 30. So three months of depreciation need caught up to the trade-in date, that is, 1/4 of your annual amount, or 625.
  • Jun 20, 2008, 11:18 PM
    vazzy
    yeah sorry about that =]
    thanks for that
    muchly:)

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