Question

Question 4 Ayayal Corporation purchased a new plant asset on April 1, 2020, at a cost of $720,000. It was estimated to have a life of 20 years and a residual value of $300,000, a physicale of 30 years, and a salvage value of 50. Ayayal's accounting period is the calendar year Ayayar prepares financial statements in accordance with IFRS Calculate the depreciation for this asset for 2020 and 2021 using the straight-line method imalac . 5275) Depreciation 2020 Calculate the depreciation for this set for 2020 and 2021 using the double-dedining balance method. (Round answers alace 5.275.) Depreciation

Answer 1

Asset Cost - April 1, 2020 Useful Life Residual Value $720,000 20 Years $300,000 1 Calculate Depreciation for this asset for 2020 & 2021 using Straight Line method Year 2020 2021 Calculation =(720000-300000)/20*9/12 =(720000-300000)/20 Depreciation ($) 15,750 21,000 Note: Depreciation for a year = (Cost of Asset-Salvage Value)/Useful Life =(720000-300000)/20 21000 Depreciation rate = (Depreciation for a year divided by Depreciable Value)*100 Depreciation Rate = (21000/420000) 100 5.00% 1 Calculate Depreciation for this asset for 2020 & 2021 using Double Declining Balance Method Year 2020 2021 Calculation =720000*10%*9/12 =(720000-54000) *10% Depreciation ($) 54,000 66,600 Under ASPE, depreciation of an asset is based on the greater of: 1) Cost less residual value (the estimated net realizable value at the end of the asset's useful life to an enterprise) over its estimated useful life; and 2) Cost less salvage value (estimated net realizable value at the end of the asset's life) over its estimated life. The useful life and method of depreciation should be reviewed on a regular basis or when significant events occur, and residual value is reviewed only when events or changes in circumstances indicate that the current estimates may no longer be appropriate. Calculate Depreciation for this asset for 2020 & 2021 using Straight Line Method and assuming Financial Statements are prepared in accordance with ASPE Year 2020 2021 Calculation =720000/30*9/12 =720000/30 Depreciation ($) 18,000 24,000 Depreciation under Alternative 1: As solved in Sub-Part 1 above Depreciation under Alternative 2: Would be Depreciation for a year =(720000-0)/30 24000 1 Costs Component 1 2 3,50,000 2,34,000 1,36,000 7,20,000 Residual Value 1,00,000 1,54,000 46,000 3,00,000 Depreciable Value 2,50,000 80,000 90,000 Life 25 Years 20 Years 30 Years 2020 Component Calculation = 250000/25*9/12 =80000/20*9/12 =90000/30*9/12 Depreciation ($) Calculation 7,500 =250000/25 3,000 =80000/20 2,250 =90000/30 12,750 2021 Depreciation ($) 10,000 4,000 3,000 17,000