[Jack.1999]

Thanks a lot! 🙂

But i require a little correction, the double entry for revaluation reserves of $45,000 will be used to record the amount in both the SOFP and OCI respectively. We will record in the SOFP as revaluation reserve as well as in OCI as gain on revaluation?

IF i remember correctly then you said previously that the gain on revaluation is recorded in OCI is because it is an unrealized profit (meaning not recognized) – BUT when the cash will be received at the time of sale then we will recognize it in SOPL as other income, is that correct?

IF there is a revaluation another time of let’s say $20,000 then how do we record this in both of our Financial statements meaning SOFP and OCI?

In SOFP, it will appear a standing balance of revaluation reserve at $65000 (45000+20000) while we will record the gain on revaluation of $20,000 for that period, is that correct?

I appreciate your efforts. So Thanks ?

[Jack.1999]

So basically we will record revaluation surplus entry like this:

Debit Land $1.5m
Credit Revaluation surplus $1.5m

My question is that the revaluation surplus will be recorded in the SOFP as equity item or it should be shown in OCI as a separate item?

Secondly, is it true that the taxes that a business pay during the period actually owed from the last year (they belong to previous year ?)

Is it also true that accrued tax is also called deferred tax?

[Jack.1999]

I watched it but didn’t understand.

Could you further elaborate the point that when do we record the revaluation surplus in SOFP and OCI? (that’s what i meant when i mentioned SOPL instead of OCI).

We will record the revaluation surplus of $1.5m in changes in equity statement and SOFP as equity item respectively but when do we record this increase in OCI?

Lastly could you please explain what is accrued tax and is it true that it is usually the case with income tax that is deferred because the accounting period of a business is different than the tax period?

[Jack.1999]

I passed my exam paper MA last month and now i am studying paper FM (F9) and I am so confused!!!

That’s why i asked you the examples for both investment and borrowing cases where investors can use present value method to evaluate the future cashflows (income in terms of investment and liability in terms of borrowing) to their current value as of today.

Can you please give me examples for both borrowing and investment where we can use present value method?

[Jack.1999]

I understand your point. Thank you. But i have something else to ASK.

The reason for using the PV is to calculate the current value of future cashflows (like future income or future liability) as of today.

In case of investment investors use PV to see how much the future income is worth at present so they can decide whether to invest or not.

In case of borrowing investors use PV to see how much the future liability is worth at present so they can decide whether to borrow or not.

In other words investors evaluate the PV of various borrowing options to see whatever loan is cheaper to borrow.

For example we have two borrowing scenarios:
1) Borrow $120,000 at interest rate of 12% for 5 years.

2) Borrow $120,000 at interest rate of 10% for 5 years.

PV = $68,091
PV = $74,510

Investor will choose to borrow the option#1 because it has lower value making it cheaper to borrow as compared to the other.

Is that all CORRECT?

[Jack.1999]

I understand that. But could you help me on this once please because it is important for me 🙂

[Jack.1999]

In paper MA it is examined very little and it has nothing to the inflation (Tutor said this). Could you please help me now. (your help is really needed here)

[Jack.1999]

Civil and Criminal courts hierarchy:

1) Supreme court (SC)
SC has both civil and criminal jurisdiction (SC heard both civil and criminal cases)

2) Court of Appeal (COA)
COA has both civil and criminal jurisdiction (COA heard both civil and criminal cases)

3) High court (HC)
HC has both civil and criminal jurisdiction (HC heard both civil and criminal cases)

4) Crown court (Crown)
Crown court has only criminal jurisdiction (Crown heard criminal cases only)

5) Country court (CC)
It deals with unresolved matters of property in Contract and Tort law. It has only civil jurisdiction (CC heard civil cases only)

6) Magistrate court (MC)
It deals with small domestic matters. It has both civil and criminal jurisdiction (MC heard both civil and criminal cases)

These are all the courts’ hierarchy that deals with both civil and criminal cases. First tell me that since crown court has criminal jurisdiction only so they will not hear civil cases?

Please correct me if I am wrong anywhere? Then please explain the three divisions of the High court and what do they deal with and what jurisdiction they have to hear cases such as civil or criminal cases (or both)?

[Jack.1999]

That is not what I meant.

XYZ company wants to do a contract from ABC company for the lawnmower service. Brett has been a major business partner in ABC company. Since Anna and Brett have been married for 10 years now and Clide also knows about this partnership.

Who is responsible to disclose it to the XYZ company about the business interest of Brett in ABC company?

Options:
1) Anna and Brett
2) Anna, Brett and Clide
3) Anna only
4) Brett only

[Jack.1999]

Inventory costs involved several costs which are calculated like this:
Raw material———————————950
Work-in-Progress—————————400
Finished goods——————————900

Raw material involves several costs such as:
material cost———————————350
labour cost————————————200
Overheads————————————400
Total Production costs———————950

Raw material cost involves the costs of material cost, labour cost and overheads (correct?)

Cost of goods sold is calculated like this:
Opening inventory—————————————————————1000

Purchases:—————————————————1200
– less: material cost—————————————(350)
– less: labour cost——————————————(200)
– less: overheads——————————————(400)

Total Production costs———————————————————1950
less: Work-in-Progress———————————————————(400)
less: Finished goods————————————————————(900)
Cost of goods sold—————————————————————650

We are taking finished goods as closing inventory which should be less from total production costs but WIP is less because goods are not fully ready yet.

Is it all right now?

[Jack.1999]

Thanks 🙂

Please also say what does allowance mean in accounting because the allowance is made against depreciation expense and bad debt expense…

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