At the beginning of the current period, Janelle Ltd sold a depreciable asset to its wholly owned subsidiary, Adam Ltd, for $80 000. Janelle Ltd had originally paid $200 000 for this asset, and at time of sale to Adam Ltd had charged accumulated depreciation of $150 000. This asset is used differently in Adam Ltd from how it was used in Janelle Ltd; thus, whereas Janelle Ltd used a 10% p.a. straight-line depreciation method, Adam Ltd uses a 20% straight-line depreciation method. In calculating the depreciation expense for the consolidated group (as opposed to that recorded by Adam Ltd), the group accountant, Roger Moore, is unsure of which amount the depreciation rate should be applied to ($200 000, $50 000 or $80 000) and which depreciation rate to use (10% or 20%). Required Provide a detailed response, explaining which depreciation rate should be used and to what amount it should be applied.

At the beginning of the current period, Janelle Ltd sold a depreciable asset to its wholly owned subsidiary, Adam Ltd, for $80 000. Janelle Ltd had originally paid $200 000 for this asset, and at time of sale to Adam Ltd had charged accumulated depreciation of $150 000. This asset is used differently in Adam Ltd from how it was used in Janelle Ltd; thus, whereas Janelle Ltd used a 10% p.a. straight-line depreciation method, Adam Ltd uses a 20% straight-line depreciation method. In calculating the depreciation expense for the consolidated group (as opposed to that recorded by Adam Ltd), the group accountant, Roger Moore, is unsure of which amount the depreciation rate should be applied to ($200 000, $50 000 or $80 000) and which depreciation rate to use (10% or 20%). Required Provide a detailed response, explaining which depreciation rate should be used and to what amount it should be applied.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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