On January 1, 20X1, Mighty Entity pays the fair value of $50,000 for a new piece...

On January 1, 20X1, Mighty Entity pays the fair value of $50,000 for a new piece of machinery with an estimated useful life of 8 years. The machine has a drum that must be replaced every four years and costs $20,000 to replace. Continued operation of the machine requires an inspection every four years after purchase and the inspection cost is $4,000. Under IFRS, what is the depreciation expense of year 2?

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	Fair value of machinery	Fair value of Drum
	$ 30,000	$ 20,000
Life	8 years	4 years

Depreciation for one year	$ 3,750	$ 5,000
Total depreciation	$ 8,750

Drum and Machinery will be considered separate assets owing to their different useful lives and inspection cost doe not represent any asset.

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ekkarill92 answered 4 hours ago

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