Final answer:
When an asset being depreciated by a group or composite depreciation method is disposed of, the accumulated depreciation is allocated to each component of the group or composite based on their cost. The remaining book value of each component is then deducted from the group or composite depreciation.
Step-by-step explanation:
When an asset being depreciated by a group or composite depreciation method is disposed of, the accumulated depreciation is allocated to each component of the group or composite.
This allocation is done based on the percentage of the total cost of each component compared to the total cost of the group or composite.
The remaining book value of each component is then deducted from the group or composite depreciation.
For example, let's say a company has a group of machinery with a total cost of $100,000.
Component A has a cost of $30,000, Component B has a cost of $50,000, and Component C has a cost of $20,000.
If Component A is disposed of, and the accumulated depreciation for the group is $60,000, then the accumulated depreciation allocated to Component A would be $18,000 (30,000/100,000 x 60,000).
The remaining book value of Component A would be $12,000 (30,000 - 18,000).