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(i am not comfortable with Dr & Cr)
What i have understand in this question.
# L&B
increase OCI -> revaluation gain on Land 10,000 + building 35,000
increase COS -> depn on building 5,000
SOFP -> Land 80,000 + building 170,000(not understood – DR Revaluation reserve 1,000 / CR S of Comp Inc 1,000; pls kindly explain without Dr and Cr, What increase and what decrease)
# Plant
increase COS -> depn on plant 19,500
SOFP -> Plant 110,500#Leased Plant
Extract of Question
Rental of leased plant 22,000On 1 April 2010 Kala entered into a lease for an item of plant which had an estimated life of five years. The lease period is also five years with annual rentals of $22 million payable in advance from 1 April 2010. The plant is expected to have a nil residual value at the end of its life. If purchased this plant would have a cost of $92 million and be depreciated on a straight-line basis. The lessor includes a finance cost of 10% per annum when calculating annual rentals. (Note: you are not required to calculate the present value of the minimum lease payments.)
-> I am really really struggling in this part. i wish i could understand any things in this part of the question. Pls help sir.
Kala is a straight forward leasing question with a 10% implicit interest rate. I’m not going to write out the full answer so you’ll need to be a bit more specific about which particular bit you want me to explain
The 1,000 transfer from revaluation reserve to retained earnings (you’ll see it going through the statement of changes in equity too) is a voluntary / non-mandatory but recommended practice of “compensating” retained earnings for the extra depreciation that is caused as a result of a revaluation
Does that make sense to you?
DR OUFL a/c 22,000
CR Rental of leased plant 22,000
(to correct incorrect accounting treatment)
->
FC in I/S 7,000 and CL 16,500 and LTL 60,500 ; i have understood
Sir, what is meant by OUFL; pls explain this part without Dr and Cr.
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