Dynamic Resources reported the following information for year ending June 30, 2016 (values in millions): Plant, Property & Equipment, gross $3,000 Accumulated Depreciation 1,400 Plant, Property & Equipment, net 1,600 Salvage Value 200 The company also reported the following transactions on the first day of fiscal 2017: Sale of asset with gross PP&E of $600 million for $500 million and useful life of 3 years and no salvage value. Recorded a gain on sale of $300 million. Write off of asset with gross PP&E of $400 million. Asset was purchased 3 years ago with original useful life of 4 years and salvage value of $200 million. Purchase of new equipment for $1,400 with useful life of 8 years and no salvage value. Assuming the remaining useful life of other equipment is 10 years on a straight-line basis, what is the net PP&E as of June 30, 2017?
A. $2,125 million
B. $2,260 million
C. $2,300 million
D. $2,435 million
Gross (PPE) |
Accumulated Depreciation |
Net (PPE) |
Salvage Value |
|
Balance as on June 30, 2016 |
3000 |
1400 |
1600 |
200 |
(-) Sale of asset (PPE) |
600 |
400 |
200* |
- |
(-) Write off asset (PPE) |
400 |
150* |
250 |
200 |
Remaining Balance on the first day of the fiscal year 2017 (Excluding asset purchase with useful life 7 years) |
2000 |
850 |
1150 |
0 |
* Net value of the PPE sold = Sale vale – Gain
= 500 – 300 = 200
*Accumulated Dep of Write off PPE = [(400 – 200)/4 years] * 3 years = 150
Depreciation for the year 2017:-
Old Assets :-
Remaining life of the old asset is 10 years without salvage value
1150/10 years = 115
New Asset :-
1400/8 years = 175
Net PP&E as of June 30, 2017:-
(1150 – 115) + (1400 – 175) = 2260
Option B is correct
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