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Hallo,
I tried solving and understanding this example, and tried to solve it without the use of debit and credit side, but I couldn’t and I don’t see the meaning of it, could you tell me what they are doing here, what is the story:
The solution is in the form of a T a/c for carrying value:
Dr
Balance b/f 340000
Revaluation 100000
Cash additions 67000 (answer)Cr
Disposals (120000 at cost – 75000 acc. depr.) = 45000
Deprciation charge 23000
Balance c/f 439000How much cash has been invested in non-current assets during the year?
Thank you!
It would have been better if you had written the actual question.
I assume that you are given the carrying value at the beginning and end of the year, the depreciation, the disposal, and the revaluation amount.
In which case:
If the carrying value at the start is 340,000, then it will reduce by the carrying value of any disposals. So 340,000 – 45,000 = 295,000. It will also reduce by the depreciation for the year, so 295,000 – 23,000 = 272,000. It will increase by the revaluation surplus, so 272,000 + 100,000 = 372,000.
Since the actual closing figure is 439,000, the missing figure must be the extra investment: 439,000 – 372,000 = 67,000.Hallo,
Actually the text was missing, the example was given in the form of a table, and that’s why I couldn’t give more here.
I didn’t know we could work directly with the carrying value in the form of a T a/c, so it’s something like the non-current asset account, only here the depreciation is included in it.
Is this all they are trying to show here, and what we have to learn?
Thank you!
This is all you need for this sort of question.
I myself would not do the workings in a t-account – I would do it the way that I wrote in my last reply. However, that is up to you – whichever you find easier and faster.
In the exam all they will want is the final figure. It doesn’t matter how you actually calculate it (and they will not look at your workings anyway).
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