Bramble Corp. purchased a machine on July 1, 2017, for $30,300. Bramble paid $22

Question

Bramble Corp. purchased a machine on July 1, 2017, for $30,300. Bramble paid $220 in title fees and a legal fee of $175 related to the machine. In addition, Bramble paid $590 in shipping charges for delivery, and paid $550 to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 10 years, a total expected life of 12 years, a residual value of $5,600, and no salvage value. Bramble uses straight-line depreciation.

Calculate the 2017 depreciation expense if Bramble prepares financial statements in accordance with IFRS. (Do not round intermediate calculation and round answer to 0 decimal places, e.g. 5,275.)

Depreciation Expense $___________

Calculate the 2017 depreciation expense if Bramble prepares financial statements in accordance with ASPE. (Do not round intermediate calculation and round answer to 0 decimal places, e.g. 5,275.)

Depreciation Expense $__________________-

Explanation / Answer

Cost of the asset includes all cost necessary to bring the asset to working condition.

So charges like title fees, Legal Fees, Shipping charges etc should be included while calculating Cost of Asset

So, Cost of asset = 30300+220+175+590+550= 31835

Residual Value = 5600

Expected Useful Life = 31835-5600/10 =2623.5

So Depreciation Expense ( From July to Dec 2017 for 6 months as per IFRS) = 1311.75

Under ASPE Depreciation is charged higher of:

a) Cost less residual value over useful life or

b) Cost less residual Value over the estimated life

So Dep as per Estimated life = 31835-5600/12= 2186.25

For 1 July to Dec = 1093.125

So Depreciation as per ASPE is higher under Useful life of an asset = 1311.75

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