Angel Group Cashflow Question Dec 2013

I'll need to leave answering this until I get home tomorrow and that will have involved traveling all day today, so I could well leave answering you until Tuesday But please post again so the thread is seen to be unanswered Thanks

Means i have to repost it again?

Hi Thanks for posting again - it means that I don't have to try and remember where there's an unanswered post - I can see straight away that mine is not the last name so there's more work for me to do Now, your question! I'm confused. There is a comprehensive explanation in the printed solutions. Is that explanation causing you the problem? I quote: "The only elements recorded in the financial statements were a charge to revenue for the refurbishment of the building and the receipt of the cash grant, which has been credited to additions of property, plant and equipment (PPE). The building was revalued at 30 November 2013 at $7 million." Given the information in that quoted paragraph, are you not comfortable with the concept of writing out the bad entries, writing out the correct entries and then reconciling the two to show yourself the adjusting entries necessary? If you can do this, I believe that you should more easily arrive at the correct solution Try it and, as always, if you struggle, post again

I tried it. But failed. Tried it n failed that is why i posted. Confused between grant n ppe. Im just struck at the value of 7 n satisfied bit of with grant. It ll be great if u ellaborate it briefly.

Ok, let's just confirm the "easy" one first. The company has debited Cash with the $2m received for the grant and credited PPE with $2m It should have debited Cash with the $2m and credited $1m to retained earnings (set off against the wages expense) and $1m to a deferred income account To get from first entry to the second one we need to debit PPE $2m and credit $1m to retained earnings (profit before tax) and $1m to deferred income OK so far? Now the building. "The only elements recorded in the financial statements were a charge to revenue for the refurbishment of the building ....." so the company had debited Revenue account with $3 instead of debiting PPE $3m To correct, debit PPE $3m and credit $3m to Revenue Now, at the end of the year, revalue the building. It's being carried at $3m (after our amendment above) and we wish to revalue to $7m So debit PPE and credit Revaluation Reserve / OCI with the extra $4m Better?

Sir is it possible that we will get a cashflow question in December 2014?

Of course it's possible! It's also possible that you could get a bank reconciliation F3 type question! If you are asking "What is the chance of getting .....?" well that's a different kettle of fish altogether. I doubt very much that there will be a cash flow question in December 2014 P2 examination (I could of course be wrong!) Ok?

Ok thank you ????..i hope it doesnt come then

:)

OK, but that's such a pity. I have always found them to be the topic where I could most easily pick up marks. Each one to their own, I suppose

Thanks! now it's clear!

You're welcome

@mikelittle said: Ok, let's just confirm the "easy" one first. The company has debited Cash with the $2m received for the grant and credited PPE with $2m It should have debited Cash with the $2m and credited $1m to retained earnings (set off against the wages expense) and $1m to a deferred income account To get from first entry to the second one we need to debit PPE $2m and credit $1m to retained earnings (profit before tax) and $1m to deferred income OK so far? Now the building. "The only elements recorded in the financial statements were a charge to revenue for the refurbishment of the building ....." so the company had debited Revenue account with $3 instead of debiting PPE $3m To correct, debit PPE $3m and credit $3m to Revenue Now, at the end of the year, revalue the building. It's being carried at $3m (after our amendment above) and we wish to revalue to $7m So debit PPE and credit Revaluation Reserve / OCI with the extra $4m Better?

sir, why is the revaluation of 7m treated first before recognizing the entry adjustments for cash grant i.e DR PPE 2 CR RE 1 CR DEFERRED INCOME 1 ? and why is the DR PPE not included in year end PPE amount after adjustment instead only increase the amount by7?

yayplanet97 lol its been 2 years since i passed my acca. you came late :p