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May 11, 2016 at 11:23 pm
Sir, Ive gone through the comments and noticed that several people asked this question, but I still don’t get it. In you example, depreciation amounted to 40,000 as given by the question, you didnt add the depreciation of the asset that was sold though -> $30,000. Why?
I’m only getting confused when I try and apply your method, which is step one to deal with non-current assets to question 19.4 in the BPP revision kit. They add the depreciation of the asset sold to the accumulated depreciation that was calculated in the question. They also work out the non current assets t-account all at cost, rather than carrying value, which we also have? Could you clear this up? I would greatly appreciate it!
John Moffat says
May 12, 2016 at 5:55 am
It depends whether the question gives you the cost and accumulated depreciation separately in the Statements of Financial Position or (as in the lecture example) simply gives the net book value in the Statements of Financial Position.
Since in this example we only have the net book values, we only adjust by the NBV of the asset sold.
Abdul Nishad says
March 4, 2016 at 10:25 am
Dear Mr. John,
First of all let me thank you for your spectscular lectures which helped me clear my F2 paper in just few days.
In the lecture here, you have credited the non current assets with the net value (20000), but in the previous lecture when an asset is sold it was credited at the full actual cost.
Kindly explain why ?
I believe net value is the cost – Accumulated depreciation
March 4, 2016 at 10:56 am
It is because we only know the net book value at the start and end of the period – we do not know the cost and accumulated depreciation.
January 22, 2016 at 2:36 pm
Can you explain for me in the Example 1, When you calculate the value of acquisition asset during the year = CL+ depreciation + disposal- OB. I just wonder if the Closing balance and OB of the assets on the balance sheet are the net book value ? ( because I think they deducted depreciation twice ?)
Thank you very much,
January 22, 2016 at 6:14 pm
The values in this question must be at net book value, because that is the final value that shows in the Statement of financial position.
January 23, 2016 at 3:20 am
I think so,but why you less depreciation again? I think the purchase of asset would be by CL + disposal-OB= 545+ 20-410=155 ( your answer is 195 because you also added depreciation????)
January 23, 2016 at 7:59 am
The opening balance will be reduced by the depreciation for the year, reduced by the NBV of the disposals, and increased by the cost of the acquisitions. Since we know what the closing balance is, the acquisitions must be the missing figure.
January 25, 2016 at 7:01 am
I understand now. Thank you very much :).
December 27, 2015 at 4:43 pm
Hello sir! You took the operating profit amount initially instead of profit before tax amount and subtracted the interest expense. But if we were supposed to write the profit before tax amount, we would’ve added back the interest expense right?
December 28, 2015 at 7:16 am
Yes – taking the profit before tax and adding back the interest expense gives you the operating profit.
The rest of the statement from then on remains the same – we subtract the interest paid (which in this question is the same as the interest expense for the year, but will not always be the same).
December 23, 2015 at 4:45 pm
Can you explain how did u know profit on sale of non current asset was included already in operating profit. And under operating activities why did you included receivables and payable, what so they have to do with profit???
December 23, 2015 at 5:42 pm
But the profit on sale of non-current assets always appears in the Statement of profit or loss – it has to! (Have you watched the lectures on depreciation?)
It will therefore automatically have been included in the operating profit.
With regard to receivables and payables – what is included is the increase or decrease over the year. The Statement of profit or loss will have included the total sales and purchases for the year (whether or not the cash had been received or paid) and therefore we need to adjust for the changes in receivables and payables to turn it into a cash flow).
I don’t know whether or not you have watched all the earlier lectures, but if not then I do suggest that you do watch them. Our free lectures are a complete course for Paper F3 and cover everything you need to be able to pass the exam well.
December 23, 2015 at 6:15 pm
Sir actually i think i need to revise previous chapters also i have not practised test questions. Well sir previously in chapter 2 you said that revenue and capital expenditure will be disscussed in coming chapters but uptill chapter 13 there is no discussion on that…..
December 23, 2015 at 6:21 pm
Everything that is needed to be said for the exam about the difference between revenue and capital expenditure is covered in chapter 2 and the chapter on depreciation.
December 23, 2015 at 6:25 pm
But i have completed depreciation chapter and there is nothing regarding that in it…..
December 23, 2015 at 7:56 pm
So you have everything you need 🙂
November 25, 2015 at 7:25 pm
I refer the Statement of Cash flows pg 91 of the notes. An observation that doesn’t make sense.
The accumulated profits as at 2007 were $431,000; The profit for 2008 as per the Statement of Profit or Loss yr ended 31 Dec was $61,000 – surely this would make the Accum profit for 2008 (431,000+61,000) $492,000 – why does it have $476,000?
November 26, 2015 at 8:05 am
Because there is a dividend of 16,000.
492,000 – 16,000 = 476,000
October 14, 2015 at 9:16 am
Why 30000 which came by selling non-current assets not accounted for. I understand that 10000 was not actual profit ( because depreciation was included) and therefore it was deducted from operating profit but 30000 was recevied as cash when we sold NC assets so why is it not included in cash flow from operating profit?
October 14, 2015 at 7:04 am
Am already answered by reading different comments.Thanks my brother.God bless you!Due to my financially constrains i could not buy online courses.Very helpful!
October 14, 2015 at 8:33 am
You are welcome 🙂
September 29, 2015 at 2:33 pm
Hi sir, from where did you got the 70000 figure for issues of shares and 64000 for cash balance?
September 29, 2015 at 2:39 pm
If you look at the Statements of financial position in the question, you will see that share capital has increased by 50,000 and that share premium has increased by 20,000. SO they must have raised cash of 70,000.
The cash balance at the end of last year is again on the Statement of financial position for last year!
(I assume that you have downloaded the free Lecture Notes? There is no point in watching the lectures without them!!)
October 4, 2015 at 8:54 am
Alright, thanks sir.
September 23, 2015 at 6:33 pm
Dear John, do we use increase (decrease) in net receivables or total receivables?
August 23, 2015 at 2:13 am
On your proforma for the statement of cashflows i notice provision for interest expense.There is an interest expense also in the Income Statement of the example.Why doesnt it appear though in the operating activities?
August 23, 2015 at 5:43 am
We take the operating profit (which is before interest) and then show the interest actually paid as a separate cash outflow.
I do explain this in the lecture.
September 2, 2015 at 11:49 am
Hi, I’ know you need answer not a question. But not sure where to ask here.
this notes are date to when? because my books are from this year. I don’t match his samples questions on page 89. Please if you could tell me.
September 2, 2015 at 2:55 pm
The lecture goes through the example on page 91 of our free lecture notes.
Our lectures and lecture notes cover the current syllabus for Paper F3.
September 2, 2015 at 4:05 pm
July 24, 2015 at 4:10 pm
Hi Sir, I do not understand why the profit on sale is deducted from the operating profit in the cash flows from operating activities? Also why do we add depreciation when it is not a cash expense, what does this mean?
Hope you can clarify my doubts.
July 24, 2015 at 4:28 pm
In arriving at the profit, depreciation will have been charged as an expense. However, depreciation is not a payment of cash and so because we want the ‘cash profit’ we need to remove the expense – without it the profit would be higher. So we add it back to get the cash profit.
Similarly, any profit on sale will have increased the profit in the Statement of profit or loss. Again, the profit on sale is not a receipt of cash and so we need to remove it from the profit to get the ‘cash profit’.
(I do assume that you have watched the earlier lectures on depreciation and so are happy as to how depreciation and profit or loss on sales are calculated, and realise that these figures are not receipts or payments of cash.)
July 10, 2015 at 2:50 pm
if we had a revaluation loss what we do
July 10, 2015 at 6:44 pm
Revaluation losses do not occur in Paper F3, only revaluation profits! 🙂
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