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This example is LSBF’s financial accounting book and in the answer sheet the solution is below
Imagine it is T account and you see that in the disposal T account proceeds are 2625
—————————–PP+E cost
——————-DR———————–CR
Balance b/f 405,000————— Disposal 67,500
Revaluation gain 30,000
Additions (Bal fig) 97,500——— Balance c/f 465,000
—————————532,500———— 532,500———————-PP+E acc depn
————————–Dr————————Cr
Disposals (Bal fig) 58,500—— Balance b/f 283,500
—————————————Charge for year 22,500
Balance c/f 247,500
———————306,000——————- 306,000————————Disposals
———————————-Dr————–Cr
—————————-Cost 67,500– Accum depn 58,500
———————————————Proceeds (Bal fig) 2,625
———————————————-Loss 6,375
——————————–67,500———————– 67,500I agreed with the way that you say if the note would have not showed 50k(original cost) but in fact it showed the original cost of asset whose net book value is 20k.
I really need widespread clarification for this part to get it betterDear tutor in your statement cash flow example note 2 says that
During the year there had been sales of non-current assets for $30,000. The assets sold had
originally cost $50,000 and had a net book value of $20,000. The original cost is 50k and the net book value (carrying value) is 20k. 50k-20k=depreciation 30k.your calculation———————–my calculation
asset bf-410k—————————–410k
disposal (20k)——————————(50k)
depreciation (40k)————————(40k)
acquisition 195k—————————225k
c/f 545k—————————————545kthe only difference with 20k and 50k.
but I calculated without watching your lecture and when reconciled it with your lecture video I saw you calculated different from mineI think 50k should be disposed of as it is the original cost of the asset which is 20k net book value.
In your asset disposal example ( PPE chapter) you usually disposed it of at original cost 15000-I am talking about in your prior chapter. When we get profit or loss on disposal we use net book value minus sales proceed but we record the original cost when the asset bought. I hope you got it where is my confusion between ppe chapter example and statement cash flow chapter example 2
Dear Tutor,I want my question to be answered because I want to know it.please do not be indifferent to my query.
Dear Tutor, I watched both FR and SBR and it has not been covered.
I am currenly preparing SBR and I know I do not need dr cr for sbr but for my in-depth understanding I want to know it.
I would like please pay attention to my question to get my answer.
Thanks in advanceif it is a sale
buyer-lessor
recognise the purchase of asset.apple bought the asset @ 10mln and its purchase is below
dr asset 10mln
cr cash 10mlnapply lessor accounting
i am confused in this part.after buying I lease it back to seller side then I have to record receivable @ pv of lease liability and in this case it is
dr receivable-7721735
cr asset-7721735there is difference between 10000000-7721735=2278265-how di i record it?
Dear Tutor, for calculation of the in advance and in arrears there is no problem.
In arrears
there is a chance of dividing cash into interest income and receivable from lessor side likewise interest expense and lease liabillity from lessee side example
when it is arrears then
debit cash-5000
credit receivable-4113
credit finance income-887lessee side in arrears
debit lease liability-4113
debit interest cost-887
credit cash-5000in advance method you can not do that i think.
when it is in advance we write debit and credit
debit receivable-887
credit finance income-887debit cash-5000
credit receivable-5000when it is arrears then
debit cash-5000
credit receivable-4113
credit finance income-887lessee side in arrears
debit lease liability-4113
debit interest cost-887
credit cash-5000in arrears method we usually deduct finance cost or income from cash but in advance it is not the same i mean I can not give the double entry for the in advabnce method in the below
lessee side in arrears
debit lease liability-4113
debit interest cost-887
credit cash-5000lessor side in arrears
debit cash-5000
credit receivable-4113
credit finance income-887will its debit or credit entries be the same when it is in advance or in arrears payment?
sorry I wrote debit; my question here is that since the C/F on 31 december 20×1 is 10500 why we deduct 9133 from 10000 not 10500?when we credit p/l what is that ?
On 1 January 2015, Plum entered into a five year finance lease of machinery. The machinery has a useful life of six years. The annual lease payments are $5,000 per annum, with the first payment made on 1 January 2015. To obtain the lease Plum incurs initial direct costs of $1,000 in relation to the arrangement of the lease but the lessor agrees to reimburse Plum $500 towards the costs of the lease. The rate implicit in the lease is 5%. The present value of the minimum lease payments is $22,730
it is plum example.
years——-D.F———————C.F—————————-Pv
0————–1————————5000————————–5000
1-4———–3.546——————-5000————————–17730
==========================================22730in the prior example 1 million is not added over liability it is both paid at the commencement date or begining of the year.why if it is the same method of pay but different way of calculating.
Dear Tutor, let us first concentrate on plum example(open tuition note) and then the example in Kaplan study text.
lease pay-5000
lease contract year-5
payable -at the start of the year
the rate implicit-5%
fufute lease pay-22730since it is the start of the year we take 0-4 annuity (1+3.546)*5000=22730
debit asset-22730
credit-22730Kaplan example
lease pay-1000000
lease contract year-4
incremental borrowing rate-5%
payable at the start of the yearI solved it in the following way
since it is the start of the year 0-3 (1+2.723)*1000000=3723000
debit asset–3723000
credit liability—-3723000in the kaplan solution.
The first year
The first payment occurs on the commencement date so is included in the initial cost of the right-of-use asset:
Dr Right-of-use asset $1m
Cr Cash $1mDate ———-Cash flow ($m) ——–Discount rate——— Present value ($m)
1/1/X2 ————–1.0 ————————1/1.05 ——————–0.95
1/1/X3 ————–1.0————————– 1/1.05^2 ——————0.91
1/1/X4 ————–1.0 —————————1/1.05^3 ——————0.86
–––––
—————————————————————————————-2.72Dr Right-of-use asset $2.72m
Cr Lease liability $2.72m
they did not consider 0 year as it is the start of the year and it is the same example in the opentuition example.i think i found the same question for PS in your note
A company has in issue 10,000 5% Preference Shares of $1 each. The dividend is payable halfyearly.
debit cash-10000
credit preference share-10000debit finance cost-250
credit accrued preference dividend account-250i think it is the almost the same question from context point of view
ordinary share yes I understood.
Preference share what i do not understand when company pays dividend over preference share do we always credit accrued redeemable preference share?if we credit accrued redeemable preference share then we recognised it unedr current liability?
Dear Tutor sorry for this one
It provides a specific allowance of 60% on a debt of $20000. if 20000 amount’s 12000 is specific allowance but what is the remaining amount (8000) considered?
