Dynamic Resources reported the following information for yea

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

Solution

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