[iputaspellonfar]

Hey guys, I tried to post in the FAR study section but the forum is not letting me. It’s coming up with some error but I would love some help with this question. A transportation company purchased a passenger bus for $100,000 on January 1, year 1. The company expects the bus to be used for 20 years if it follows a maintenance schedule of replacing the engine after 10 years and replacing the seats every eight years. it estimates that the current cost to replace the engine is $25,000 and the current cost to replace the seats is $10,000. The company uses straight line depreciation and the bus has no residual value. The company considers any component equal to or greater than 10% of the overall cost to be significant. Under IFRS, how much depreciation expense should the company recognize for the bus for the year ended December 31, year 1?

A. 5,000
B. 7,000
c. 7,250
D. 8,000

the correct answer is B.

[iputaspellonfar]

Has anyone made a list of all the journal entries and is willing to share them? 🙂

[Finally_a_CPA]

Never mind, didn't read the whole thing. Let me get back to you. LOL!

AUD - 75
BEC - 78
FAR - 81
REG - 92

"If you study, you will pass" - Roger

[iputaspellonfar]

I know I thought the answer would be 5,000 too for the same exact logic you mentioned so I am confused.

[DTBird]

https://www.principlesofaccounting.com/illustrative%20entries/entrieslist.htm

AUD - 78
BEC - 77
FAR - 76
REG - 80

Texas CPA

BEC - 77 (5/16)
AUD - TBD (8/16)
REG - 80 (1/16)
FAR - 76 (8/15)

[iputaspellonfar]

Thank you DTBird!

[cpaMD86]

Were you only looking for the entries or an explanation to the solution?

Just in case you were also looking for an explanation:

IFRS depreciation is done by component. So, we have to individually depreciate the engine and seat.

25,000/10 = 2,500
10,000/8 = 1,250
100,000-25,000-10,000 = 65,000/20 = 3250

2500+1250+3250 = 7000

AUD - 80
BEC - 80
FAR - 82
REG - 79

Be willing to be inconvenienced for your conviction.

Roger/Ninja MCQ/Ninja Notes

FAR: 9/3

[KJ]

Under IFRS, each component is depreciated separately.

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

"Everything should be made as simple as possible, but not simpler" - Albert Einstein

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[iputaspellonfar]

Thank you.

[Author]

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