Determine the carrying amount of the asset as at december

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Reference no: EM132932005

An entity constructed a plant on January 1, 2016. The plant had a useful life of 50 years from the date it was constructed and ready to be used. The asset was properly installed and ready to be brought into use on April 1, 2016, but the entity actually commenced use of the asset on June 30, 2016. The asset was self-constructed by the entity. The entity incurred direct material, direct labour and overheads of $200 million, $150 million and $250 million respectively. Of the total overheads, 40% represents cost overruns due to inefficiencies by the project manager. To assist with appropriate usage of the asset, the entity incurred an additional $25 million to train all the operators to use the machine. The costs incurred in constructing the asset are expected to increase efficiencies and yield enormous future economic benefits.

Required:

Problem a. Determine the depreciation charge for the period ended December 31, 2016.

Problem b. Determine the carrying amount of the asset as at December 31, 2017.

Reference no: EM132932005

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