Question 1

LogisticsPro purchased a delivery truck for $60,000 on 1 January 20X1. It was initially depreciated on a straight-line basis over 5 years with a $10,000 residual value. On 1 January 20X3, after 2 years of depreciation, the directors revise the remaining useful life to 2 years (total life 4 years) and revise the residual value to $5,000. What is the depreciation charge for the year ended 31 December 20X3?

Accepted Answer

Calculate the carrying amount at the date of change. Then, apply the new estimates (remaining life and new residual value) prospectively to this carrying amount.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Applying the new estimates retrospectively (recalculating from year 1) or forgetting to deduct the accumulated depreciation before applying the new life.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 3

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