The LEON company acquired a helicopter in 2013. At that time of acquisition, the cost of the jet frame was $3,200,000 and the additional cost of the engine was $300,000. In 2016, the engine was replaced with a new one costing $500,000. At that time of replacement, the accumulated depreciation to date on the jet frame was $875,000 and on the engine was $200,000. Using the principles outlined in IAS 16, what amount should be recognized at the date of replacement?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
The LEON company acquired a helicopter in 2013. At that time of acquisition, the cost of the jet frame was $3,200,000 and the additional cost of the engine was $300,000.
In 2016, the engine was replaced with a new one costing $500,000. At that time of replacement, the
Using the principles outlined in IAS 16, what amount should be recognized at the date of replacement?
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