On 1 January 2016 ABC Ltd purchased a machine worth GH¢480,000 with an estimated useful life of 20 years and an estimated zero residual value. Depreciation is on a straight-line basis. The asset had been re-valued on 1 January 2018 to GH¢500,000, but with no change in useful life at that date. On 1 January 2019 an impairment review showed the machine’s recoverable amount to be GH¢200,000 and its remaining useful life to be 10 years. Required Calculate: 1. a. the carrying amount of the machine on 31 December 2017 b. the revaluation surplus arising on 1 January 2018 2. the carrying amount of the machine on 31 December 2017 (immediately before the impairment). 3. a. the impairment loss recognized in the year to 31 December 2019. b. The depreciation charge in the year to
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On 1 January 2016 ABC Ltd purchased a machine worth GH¢480,000 with an estimated useful life of 20 years and an estimated zero residual value.
Required Calculate:
1. a. the carrying amount of the machine on 31 December 2017
b. the revaluation surplus arising on 1 January 2018
2. the carrying amount of the machine on 31 December 2017 (immediately before the impairment).
3. a. the impairment loss recognized in the year to 31 December 2019.
b. The depreciation charge in the year to 31 December 2019.
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