A building was revalued to £400,000 at the start of the year. It has a remaining useful life of 20 years and no residual value. What is the depreciation charge for the year under IAS 16?
Answer and explanation
Correct answer: C. £20,000
- Step 1: After revaluation, depreciation is based on the revalued amount over the remaining useful life.
- Step 2: £400,000 ÷ 20 years = £20,000 per year.
- Step 3: The previous figure is irrelevant to this year's depreciation.
Answer
£20,000.
Why not the others: £8,000: This is based on the old carrying amount of £160,000; depreciation must be calculated on the revalued amount. £40,000: This divides by 10 years instead of the stated 20 years remaining. £400,000: This charges the whole revalued amount in a single year, ignoring its useful life.
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