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practice paper - CPAP 2018 question

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charlotte06:
Help with this please. I couldn't work out the amount correctly for accumulated depreciation - van and disposal of van entries. The answers says its $10500. Please explain how to get that. The question also does not tell us the carrying value. I understand the entires for a trade in/disposal of non-current asset but it's somehow this calculation for these two entries that i couldn't work out.

DoctorTwo:
Remember straight line is historical cost less residual value divided by useful life in years.

39600/1.1 = 36000 (to remove GST)
36000(historical cost)-15000 (residual value)= 21000/5 (5 is the useful life in years) = 4200. This is the depreciation expense per year. Since the van was purchased on 1 January 2016 and then disposed of on 30 June 2018, we need to depreciate for the 2.5 years.

You can just calculate the accumulated depreciation by doing 4200*2.5 (depreciation expense for 1 year*number of years depreciating for) = 10,500. Alternatively, if it makes it easier you can do 4200 + 4200 (2 years) + half of 4200 which is 2100 (6 months) = 10,500.

Also, carrying value is equal to historical cost less accumulated depreciation, so that would be 36000 - 10500 = 25500.

Reply if you need more help or if I missed something! Good luck tomorrow!!! :)

charlotte06:
I understand it now! I neglected the important info. I was wondering why I found it so difficult trying to work it out when it was actually so easy.

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