Depreciation

[Poonam]

Hello Students,

Try to solve this question. I will post the answer shortly.

Amazing ltd purchased machinery for $120,000 on 01 January 20X2. Its expected life was 10 years. Amazing ltd depreciated it by SLM for 20X2 to 20X6. On 01 January 20X7 the asset was revalued at $90,000. Calculate the amount to be transferred from the revaluation reserve to the retained earnings.

(a) $3,000
(b) $6,000
(c) $12,000
(d) $9,000

All the best!

Poonam

[Davina411]

im not quite sure but is it D?

[Jeremy007]

I might get it completely wrong. My answer is $30,000

[veditahjps]

i come to $18,000...am not quite sure

[Poonam]

Hi

The correct answer is B.


Depreciation on revalued amount for the remaining life (5 years) will be $90,000/5 = $18,000
Depreciation on the original cost $120,000/10 = $12,000

Difference $6,000
Amount to be transferred to the retained earnings = $6,000

Thanks
Poonam.

[Sonal]

I might get it completely wrong. My answer is $30,000

I think answer should be $6,000.


120,000/5 years = 60,000
revalued amount =90,000
difference amount = 30,000

$30,000/Remaining life 5 years
$6,000 amount of depreciation transferred to the retained earnings.

[Jeremy007]

I think answer should be $6,000.


120,000/5 years = 60,000
revalued amount =90,000
difference amount = 30,000

$30,000/Remaining life 5 years
$6,000 amount of depreciation transferred to the retained earnings.

Thanks, Sonal. Your detailed answer clarified my misunderstanding.