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F7 Chapter 23 Questions

VIVA

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  1. Hi Mike, I think the safety guard could be seen as an improvement to the machinery rather than a component having its own useful life.
    If we go by the question, it means the safety guard would last longer that the machinery itself because it was acquired later than the machinery and they both have 10 years estimated useful life.
    Please help clarify this.

    • Does this earlier response not answer it?

      “It鈥檚 been reclassified as an investment property that uses fair value model so gains and losses go through statement of income, not through revaluation reserve”

      If not, post again, but this time tell me which question it is that you are asking about!

      OK?

  3. Hi sir, On question 4 depreciating by the percentage, is it not like using the reducing balance method? Because the percentage is usually calculated on the net book value every year and I see in your explanation I’m the answer it is just the first years 2 percent amount spread over all the years. I was just curious. Please explain to me as I am a bit doubting. Thank you very much.

    • Are you in work?

      Incidentally, better to repost this on the Ask ACCA Tutor F7 forum. That way everyone will benefit

      In fact, if you want a guaranteed reply, you MUST post it on Ask ACCA Tutor F7 page. That way I can guarantee that I’ll see your question – I only rarely look at Latest Comments”

    • Before letting the building on lease, Peke had owned that building for 9 years and 4 months.

      Annual depreciation was $27,600

      9 years and 4 months at the rate of $27,600 is $257,600 so, at date of valuation on 31 May, 2011, the carrying value was $1,122,400

      valuation was $1,520,000

      So credited to Revaluation Reserve was $397,600

      OK?

      • But what about the revaluation of 17, 50,000 as on 31 july? Why this is not considered at the year end even the company has policy of fair value model.

      • It’s been reclassified as an investment property that uses fair value model so gains and losses go through statement of income, not through revaluation reserve

      • A full year at $77,000 on the original machine + 3 months depreciation on the safety guard. But the safety guard has a useful life of only 80 months – ie up to the end of the useful life of the original machine

        So $40,000 / 80 months is $500 per month and there are three months from 1 September to 30 November

        $77,000 + $1,500 is $78,500

      • Hi Mike, I think the safety guard could be seen as an improvement to the machinery rather than a component having its own useful life.
        If we go by the question, it means the safety guard would last longer that the machinery itself because it was acquired later than the machinery and they both have 10 years estimated useful life.
        Please help clarify this.

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