The balance in the vehicles account in the ledger of smwg limted was R 1 250 000 on 01 January 2023. A vehicle, with a cost price of R 375 000 and accumulated depreciation of R 300 000, is planned to be sold for R 62 500 on 30 June 2023. A new vehicle with a cost price of R 625 000 will be purchased to replace it on the same day. The total depreciation on vehicles for 2023 is estimated to be R 312 500. What will be the carrying value of the vehicles in the pro forma statement of financial position as at 31 December 2023?
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.
The balance in the vehicles account in the ledger of smwg limted was R 1 250 000 on 01 January 2023. A vehicle, with a cost price of R 375 000 and
What will be the carrying value of the vehicles in the pro forma
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