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Generally, I find this topic more confusing,more if it is combined with the Statement of Cash Flows. One other part that troubles me is ‘part exchange’.
I really need your advice on how to approach this topic otherwise I have no qualms with the Depreciation in general.Yours,
BatrabenWith regard to Statements of cash flows, I can’t really add anything to what I say in the free lecture.
With regard to part exchange, if you find it easier then treat it as though two separate transactions – selling the asset and receiving the cash, and then buying the new asset and paying out the cash. That is all really that is happening with part exchange (except that instead of receiving and paying cash, you just pay the net amount).
Don’t worry about how the double entries look – it is not a double entry exam (there is very little testing of debits and credits).
I have a question can help me,
On 1 July 2016 an item of plant was disposed of for $10m cash. The proceeds have been treated as sales revenue. The plant is still included in the above trial balance with at its opening cost of $28m and accumulated depreciation of $20m.T.B
Plant and equipment -at cost $88,600m
Plant and equipment accumulation depreciation at 1 January 2016 $33,400mThis is how I answer it:
by creating T account
Sale Revenue Cr $10m – Dr $10m
Asset Plant Dr $10
Disposal account Cr 10mProceeds from the sale – Net Book Value of Asset= Gain or loss
$10,000m – ( $88,600m – $33,400) = $45,200 lossIn the SOFP
Plant ($88,600m – $33,400m) = $55,200mIn the SOCI
Revenue less ( $10,000)
Other Comprehensive Income
loss on Disposal $45,200MYou have not said what the question asked for! In the exam it is very unlikely that you would be asked what appears in the SOFP and SOPL.
Also in the exam you will not have the time to prepare t-accounts, and t-accounts are not needed to answer the question.
All of what you ask is covered in my free lectures and you should watch them. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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