Question 1

**Section A**

On 1 January 20X4, Crimson Textiles bought a weaving machine for $60,000. It was being depreciated over 5 years on a straight-line basis with a $5,000 residual value. On 1 January 20X6, management revised the remaining useful life to 4 years (from that date) and revised the residual value to $2,000.

What is the depreciation charge for the year ended 31 December 20X6? (Enter numbers only)

Accepted Answer

Calculate the carrying amount at the date of the change in estimate (1 Jan 20X6). Then, calculate the new depreciation charge by taking the carrying amount, subtracting the new residual value, and dividing by the new remaining useful life.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Applying the change retrospectively instead of prospectively, or forgetting to subtract the new residual value.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 1

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