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November 21, 2015 at 8:50 am
What do you mean by saying non current assets fall in value and we depreciate them. In previous lecture you said we depreciate just because to spread the cost over it useful life as expense?.
John Moffat says
November 21, 2015 at 9:22 am
The reason for depreciating is to spread the cost, certainly.
But as you will have seen in the earlier lectures on depreciation, when we do depreciate, one effect is to have the expense in the Statement of profit or loss, and the other effect is to reduce the carrying value (net book value) in the Statement of financial position.
November 20, 2015 at 4:07 pm
Why you choose to take 2% of orignal cost in first half to take depreciation charge on orignal cost of building i.e. 3,600,000and in second half you choose to take remaining years to take depreciation charge on re valued building cost i.e.3,072,000. Why u didn’t take 2% in second half also
November 20, 2015 at 4:09 pm
The 2% meant that there was expected to be a 50 year life (100% / 50 = 2%).
After it is revalued there are no longer 50 years of life left, so the new depreciation is based on the remaining life.
Why u didn’t take 2% to take depreciation charge on revalued cost?
November 20, 2015 at 4:10 pm
I have just answered that!!!
November 20, 2015 at 3:20 pm
I didn’t understand revaluation profit at all. In what sense you are calling it profit although i know its not earned by selling building?
November 20, 2015 at 3:57 pm
Suppose you have a building that appears on the Statement of financial position at $100,000.
Suppose you get a valuation and it is now really worth $250,000.
If you decide to revalue that it will appear on the SOFP at $250,000 which is a ‘profit’ of $100,000.
It is not a ‘real’ profit because you have not actually sold it. That is why the ‘profit’ does not appear in the Statement of profit or loss, but instead is shown separately as ‘revaluation reserve’ (and cannot be paid out to shareholders as a dividend).
November 20, 2015 at 5:11 pm
Sir can you explain that how there is profit in this case, as the value decreases from 3,600,000 to 3,072,000
November 20, 2015 at 5:13 pm
But the value is not 3,600,000 at all – that is the original cost.
The ‘value’ is the cost less the accumulated depreciation.
October 28, 2015 at 8:24 pm
There are no lectures on Chapter 7
October 28, 2015 at 9:12 pm
It is because there are no calculations involved in that chapter, and so it is for you to read yourself!
(And most of it is mentioned in the depreciation lecture anyway)
October 20, 2015 at 11:41 am
Hello Jonh.I am confused why you revalued the asset when actually it has decreased in value from 3.6 m to 3072m,couldn’t be possible that we were supposed to impair it,by Debiting impairment(expense) and credit the asset as you have credited it?
October 29, 2015 at 4:12 am
Hi Sifiso.Hahaha am based at Durban.But chances are i might come to NMMU next year for B.com Accounting.I have to think about that.
October 29, 2015 at 7:37 am
Its value has not decreased.
Its carrying value (net book value) is cost less accumulated depreciation, and that has increased. It is always the net book value that is changed in a revaluation, and we do it by removing the accumulated depreciation and adjusting the cost to the revalued amount.
(I removed the other comments because this page is for comments on lectures – not for private chatting. You can message privately using the message facility on this website )
October 11, 2015 at 6:05 am
I have a question regarding to Question 5, Test.
From the lecture note, NBV 31/12/03; 52000-30000=22000
but why 30000? I think it would be 15000 because revalued depreciation for 3rd year is 15000..
please give me an answer.
October 11, 2015 at 8:59 am
I assume you mean question 4.
The NBV at 31.12.01 is 52,000.
There are 2 more years up to 31.12.03.
So the NBV at 31.12.03 is 52,000 – (2 x 15,000) = 22,000.
(The question does not say ‘no charge in the year of sale’ and therefore the is a depreciation charge in both of the two year).
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