Page 171 - F1 Integrated Workbook STUDENT 2018

NNon-curreent assets – Acquisition, Depreciiation annd Subseequent
Recoggnition

Exxampple 4

An asset wass purchased three yeaars ago for $50,000 aat which timme it was
thought that the asset hhad a residual value oof $5,000 aand a usefful econommic
life of ten yeaars. The dirrectors havve decidedd that as a result of ussing the assset
more than waas originallyy planned the remainning usefull economicc life is onlyy
fivee years as at 1 July 220X0. Theirr estimate of residual value hass remainedd
uncchanged. TThe asset is depreciaated on thee straight line basis.

Callculate thee depreciaation charrge for thee year ended 30 Junne 20X1 in
resspect of thhis asset.

Sollution

Thee original ddepreciation was:

Cosst – residual value $550,000 – $$5,000
––––––––––––––––––– = –––––––––––––––– = $44,500 pa
Useeful economic life 10
Thee asset hass been deppreciated ffor 3 years when the change of f UEL life
occcurs and thherefore CVV would bee:

Cosst $50,0000 – (3 × $4,,500) = $366,500

Thee CV at thee date of thhe change is the carrrying valuee on the staatement off
finaancial posittion for thee asset andd must therefore be uused to reccalculate thhe
neww depreciaation charge.

CV – residuall value $366,500 – $5,,000
–––––––––––––––––– = ––––––––––––––––– = $66,300 pa
Useeful economic life 5

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