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Hi John,
I dont understand the T account concept when calculating the amount of purchase of noncurrent asset in Chapter 14 Example 1, why is the $20,000 book value is the sales value? sorry, I can’t think of the concept behind the figure, could you explain more in details of the concept here? I really want to understand it.
Here the given information on note:
(1) Administrative expenses include depreciation of $40,000
(2) 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._____________________Net Book Value_______________________
Bal………………………………410,000|depreciation……………………..40,000
Acquisition……………………………..x|sales……………………………….20,000
Revaluation………………………….—|Bal…………………………………545,000
……………………………………______|……………………………………..______
…………………………………..605,000|……………………………………..605,000
……………………………………______|……………………………………._______
Bal………………………………545,000|Thank you a lot.
I understand that if there is any sales, then the net book value will fall but I don’t understand why the net book value of $20,000 is the sales figure as well. Thanks!
20,000 is not the amount received – the amount received is 30,000.
When the asset is sold, the book value is reduced by the book value of the asset sold and the double entry is to the disposal account.
What you write as narrative in the t-account is irrelevant because it is only workings and you cannot be asked to produce t-accounts in the exam.
I assume that you have watched the free lecture working through the example? (There is no point in using the notes without watching the lectures because they are only lecture notes. It is in the lectures that I explain and expand on the notes.)
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