Need help on a depreciation question please

topcat

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For this i get

£350,000 - £140,000 / 7 = £30,000 deprecation per year

Jan x2 - Jan x6 = 4 * £30,000 = £120,000

Therefore (£350,000 - £140,000 - £120,000) = £90, 000 this should be the deprecation in the last year?

Four years have already been used and this was re-assessed to 5 years meaning there if only one year remaining?

But the answer is £18,000 (£90,000 / 5 ) but this would mean the item has a total life of 8 years ...


Is my trail of thought wrong here is £18,000 correct and if yes how please?

Thank you

Nps

£18,000 is correct yes.

You start off right, you've calculated the depreciation right and have shown that up to the point of revaluation, £120,000 has been depreciated. This is where you start to veer off the track. At this point, the book value is £230,000 (350,000-120,000) and the residual value is still £140,000 but the new remaining useful life is 5 years. You now start the calculation from scratch again. You need to depreciate £90,000 (230,000-140,000) over 5 years, so 90000/5 = £18,000.

The new remaining life is from the point of revaluation NOT the original date.

topcat

Thank you :-) I was over thinking it