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May 27, 2019 at 2:33 pm
would u please explain question no. 3 ..
August 7, 2018 at 11:52 am
Because the grant $70,000 has been credited to the asset account $150,000, depreciation for 3 years has been calculated on that net figure of $80,000
So depreciation for 3 years has been charged against the retained earnings in the aggregate sum of 3 years @ $8,000 = $24,000
If no grant had been received, depreciation for 3 years calculated at 10% on $150,000 would have been 3 * $15,000 = $45,000
But now it seems that the grant is repayable 🙁
So what would the situation have been if we had never received that grant?
Asset account would show $150,000 Accumulated Depreciation account would show $45,000, and Retained Earnings would have been reduced by an additional $21,000 (ie $45,000 – $24,000)
To arrive at the position where we should have been where no grant had been received, we need to:
Dr Asset account $70,000 Cr Accumulated Depreciation account $21,000 Dr Retained Earnings $21,000 and Cr Cash $70,000
Does that make it any clearer?
April 16, 2019 at 3:54 am
Very helpful, thanks!
August 7, 2018 at 9:14 am
Good Day Sir could you please explain the Question no 4 of the test above . I don’t understand the depreciation and Retained Earnings part. please explain ASAP….
many thanks Mehreen
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