Question 1

Section A

EcoTransit operates a fleet of electric buses. A bus was purchased on 1 January 20X2 for $120,000 with a 10-year useful life and no residual value (straight-line depreciation). On 1 January 20X5, management revised the total useful life to 8 years from the date of purchase, with a revised residual value of $6,000.

What is the depreciation charge for the year ended 31 December 20X5? (Enter the number only)

Accepted Answer

Calculate the carrying amount at the date of the change (1 Jan 20X5). Then calculate the new depreciation charge based on the remaining useful life and new residual value.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Recalculating depreciation retrospectively from year 1, or forgetting to subtract the 3 years already passed from the new total life of 8 years.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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