[7fsa]

Dear John,

Do you mean that we can use absolute figure of contribution in ranking products if we don’t have budgeted sales to achieve?

[7fsa]

Dear John,
Thank you for your prompt response and collaboration.

I am just asking about the calculation of the material lost,material used and amount of material should be bought expressed in dollars amount regardless the relevant cost question mentioned above.
I am talking about the calculation generally for the question likewise mentioned above.

** Material should be bought for the production including waste of material in dollar term.
1- they will need to buy (10KG/8KG)*$20=$25 However,
** Material Actually Used into production in dollar term.
2- they will use an amount of (8KG/10KG)*20$=$16.
** Material waste expressed in dollars.
3- Which means that the difference between ($25 – $16)=$9 is the value of the 20% of lost
material as mentioned in the question above.

Are my calculations of the material lost ,material used and material should be bought right or not?
Thank you in advance.

[7fsa]

Dear John,
I hope you are doing well,
Beside what my college had presented and and according to what understood from your nice explanation above is as following,
they will need to buy (10KG/8KG)*$20=$25 However, they will use an amount of (8KG/10KG)*20$=$16.
Which means that the difference between ($25 – $16)=$9 is the value of the 20% of lost material as mentioned in the question above.

Have I understood you properly?

[7fsa]

Dear sir,

I know they have to pay the whole cost of material for,
But, that’s not my issue iam asking specifically about the calculation of material shrinkage as per me it should be $3.2 as I explained above, but as per Kaplan it is $4.
Could you tell me the difference in calculation, please?

[7fsa]

Dear John,

I think you didn’t get my question point clearly,
my question is why the amount of material shrinkage is calculated as the follow,
First method,as per kaplan
Total Material cost (16/0.8) $20
Hence, material shrinkage =$4
not according to the following method 2,
Amount of material shrinkage =16*20%= $3.2
why the material shrinkage is $4 not $3.2?
I don’t know why the material shrinkage amount is different as per the both methods mentioned above,as well as i don’t know which one is correct and why?
and when should i do use the first method and when the second should be used?

I hope I made the question a little bit clear for your kind person.
Thank you for your understanding.

[7fsa]

Dear John,
Company A produces product X and Y. Fixed overhead cost amount to $200,000 every year. the following budgeted information is available for both products for the next year.
products X Y
Sales price $50 $60
variable cost $30 $45
Contribution per unit $20 $15
Budgeted sales in units 20,000 units 10,000 units

Required;
Calculated the break-even sales?
first of all, I am going to calculate the weighted average contribution to sales ratio since the contribution per unit is different and quantities sold are different as well,
WAC/S ratio=Total contribution / Total sales
Total contribution calculation = $20*20,000 units+$15*10,000 units=$550,000
Total sales calculation =$50*20,000 units+$60*10,000 units= $1,600,000
Therefore, WAC/S ratio= $550,000/$1,600,000= 34.375%
So, breakeven sales = $200,000 fixed cost/34.375%=$5818118.1818

Comment (mentioned in Kaplan text study)
Calculation in the illustration above provide only estimated information because they assume that products X and Y are sold in a constant mix of 2X to 1Y. In reality, this constant mix is unlikely to exist and, at times, more Y may be sold than X. Such changes in the mix throughout a period, even if the overall mix for the period is 2:1, will lead to the actual break even point being different than anticipated.

My Question is as follow,
Why does Such changes in the mix throughout a period, even if the overall mix for the period is 2:1, will lead to the actual break even point being different than anticipated?
I mean by the end of the period i am going to reach/achieve the budgeted mix if even some changes have happened to the mix why will the actual break even different to the budgeted break even?could you explain the reason behind , please?

Thank you in advance.

[7fsa]

Dear John,

Thank you so much for your kind response,
Actually I did watched all your videos and really it’s useful but unfortunately i failed in the exam i just got 45% out of 100 so i do try to study the text study beside your informative lecture.

Thank you so much.

[7fsa]

Dear Sir,
I had watched your all informative lecture thank you.
Iam going wirte down the whole question to get my question.

[7fsa]

Dear Chris,

I hope you are safe and well,
Regarding the impairment loss that you have mentioned in your informative lecture in the 2nd revaluation process in the Statement of the profit or loss and other comprehensive income as per my entry above in the last comment I have just mentioned one impairment which is recognized in the profit or loss $400 at 31.12.2015.
and I have deducted the amount of the revaluation surplus but I want to say shall I do recognize first the total amount of the impairment loss in the statement of profit or loss and other comprehensive income and then close the impairment loss in the revaluation surplus as follow,

Cr Accumulated depreciation $4400
Dr Impairment loss(OCI) $3850
Dr Impairment loss (SPL)balancing figure $400
and in this case we are going to create a new account in the chart of account regarding the impairment loss and must be classified as OCI account.
so we have two account regarding the impairment loss the first one Is classified normally under the profit or loss and the second impairment loss is classified under OCI.
and just such like the revaluation gain by the end of the year should be closed in the revaluation surplus account in the equity section of the balance sheet.
Dr Revaluation Surplus (SFP) $3850
Cr Impairment loss (OCI) $3850

Could you check out my work out?
if am I wrong or right, because I have doubt about to recognise the impairment loss in the statement in the profit or loss and OCI first then close such amount In the revaluation surplus account at the end of the year.

Thank you in advance.

[7fsa]

In other words, we have an example in Kaplan Textbook it says,
Given information as follows,
Cost of an assets =$10,000,000
Dismantling cost =$4,000,000 over 20 years,
so the cost of the P.P.E equals to the initial cost plus the dismantling cost at its present value
So, the present value of the dismantling cost =1,507,557
So the total cost of the P.P.E= $10,000,000 + 1,507,557
= $11,507,557
So, we are going to recognize the cost of the P.P.E into our accounts through the following entry

Dr P.P.E (SFP) $11,507,557
Cr Bank (SFP) $10,000,000
Cr Liability (SFP) $1,507,557 we should create a new account for such liability in the chart of accounts.
after that by the end of the year we are going to do two journal entries,
1- the first journal entry to record the annual depreciation
2- the 2nd journal entry to record the liability that would increase each year for instance the interest rate is 5%
So, the annual depreciation expense = $11,507,557 / 20 years
=$575,378.
the Journal entry as follow to record the depreciation,
Dr Depreciation expense (SPL) $575,378.
Cr Accumulated depreciation (SFP) $575,378.

The increase in the liability each year should be written-off to profit or loss statement
the first year liability increase= $1,507,557* 5%
=$75,378
so the Journal entry,
Dr Interest Expense (SPL) $75,378
Cr liability (SFP) $75,378
the new liability balance = $1,507,557+$75,378
=$1,582,935
my questions are as follow,
1- Could you check out my workout and tell me what is wrong and correction if possible,Please?

2- Is the 2nd year liability is going to be calculated for the new balance of the liability as follow
=$1,582,935*5%= $79,146.75
so the balance of the liability at the end of the year is going to be as follow
= $1,582,935+$79,146.75
= $1,662,082 and so on,

3- the 3rd is how can we settle the amount of the liability which is presented in the face of the financial position?

Thank you in advance.

[7fsa]

Dear Chris,

I hope you are well and safe,
Could you tell me where is warranty accounting is covered,please?
I would like to do some revision around.

Thank you in advance.

[7fsa]

Do you mean that to be able to net investment income of as a part of borrowing cost must be the same number of months. Is that right?
And regarding the fourth month or the month which labour strike has been made the investment income in that month will go directly to profit or loss statement.
Is that right, Sir?

[7fsa]

Dear Chris,

I hope you are safe and well,
First of all I would like to thank you for your appreciated effort and informative lecture,
in regards to revaluation loss, I am going to present example 2 and its solution of the financial statement.
Could you correct any error of the following entries and the presentation of the financial statement,please?
Given information.
On 01.01.2013
PPE=$12000
Residual value =0
Expected useful life =10 Yrs,
31.12.2014
The asset was revalued at its fair value to be $14000
On 31.12.2015
The asset was revalued at its fair value to be $8000
Required the financial statement for the year ended 31.12.2015
Solution
Assets carrying value before the first revaluation as follow
=the original value less the accumulated depreciation.
Accumulated depreciation =(12000/10yrs) x 2yrs
= $2400
Then the carrying value = 12000-24000=9600
On 31.12.2014 at the date of revaluation
Gain of revaluation = $14000-$9600
=$4400
Cr:Gain on revaluation (OCI) $4400
Dr:Accumulated depreciation(SFP) 2400
Dr: P.P.E SFP (balancing figure) 2000
The depreciation Expense for the year of 2015
Annual depreciation expense =(14000/8yrs)
=1750
Dr Depreciation expense (SPL) $1750
Cr Accumulated Depreciation (SFP) $1750

by the end of the year gain on revaluation account is going to be closed to Revaluation surplus account in the equity section through the following entry
Dr Gain on revaluation (OCI) $4400
Cr Retained earnings (SFP) $4400
At the end of the year we should increase the profit of the year through the retained earning account due to the excess depreciation expense charged to the profit or loss account due to the increase in the value of the PPE due to the revaluation surplus
Then, Excess depreciation =$1750-1200=550
Dr revaluation reserves 550
Cr Retained earnings 550
The financial position before the 2nd revaluation AT 31.12.2015
**Statement of the financial position
PPE(NCA) 12250
Revaluation Reserves(Equity section) 3850
**Statement of the profit or loss
Depreciation expense(SPL) 1750
Gain on revaluation (OCI) 4400
At the date of the 2nd revaluation On 31.12.2015
the value of the PPE was fallen to 8000
Impairment loss =$12250-8000=4250
Cr Accumulated depreciation (SFP) 4250
Dr Revaluation Reserves (SFP) 3850
Dr Impairment loss (balancing figure) $400
The presentation of the financial statement after the second revaluation n 31.12.2015
**Statement of the financial position
PPE $8000
Revaluation Reserves $0
**Statement of the profit or loss
Depreciation expense $1750
Impairment loss $400

Could you sir check out the presentation of the financial statement at 31.12.2015 and tell me the errors, please?
Sorry for the long question and your time,
Thank you so much.

[7fsa]

You said sir, that my entry is fine, which is mentioned above.
So what is going to be the presentation of statement of financial position and profit or loss statement in that case?

Thank you in advance.

[7fsa]

Thank you for your nice explanation.

[7fsa]

Can be sold at wholesale to a local discount store for $10 Not $110 Iam sorry

[7fsa]

And what about the calculation of the depreciation shall I calculate the depreciation for the whole amount of the building I.e the building itself included the land)?
does that count as overstated of depreciation expense charged?
Thanks alot.

[7fsa]

And show me the journal entry if possible

[7fsa]

Thank you so much dear.

[7fsa]

I have posted over there but no reply from your side could you please help me.

[7fsa]

Dear Chris,
I have a technical problem I can no longer post questions for ask the tutor anymore could you help me please

[7fsa]

Thanks dear,
It’s very clear thank you so much.

[7fsa]

In regards to the exam it was ok,
but we need laptops better than Old version computer devices Our generation is more familiar to laptops

[7fsa]

Ok dear,
Thank you so much .

[7fsa]

Thanks Dear,
Thank you so much.

[Author]

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