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The asset register shows a carrying value for non-current assets of $85,600; the ledger accounts include a cost balance of $185,000 and an accumulated depreciation balance of $55,000.
Which of the following may explain the discrepancy?
C The omission of the disposal of an asset from the ledger accounts (cost $25,600 and accumulated depreciation at disposal $11,200) and the omission of an addition of land costing $30,000 from the register.
D The omission of an upwards revaluation by $16,400 from the register and the accidental debiting of the depreciation charge of $28,000 to the accumulated depreciation ledger account
The answer is C but I would like to understand why it is not D? It says accidental debiting but does not say it should have been credited?
85600+16400 = 102000
185000-(55000+28000) = 102000thanks for the time!
The depreciation charge for the year should always be credited to the accumulated depreciation account (and debited to the depreciation expense account).
We would never ever debit the accumulated depreciation account with the charge for the year (unless it was an accident/mistake).
Hi sir could u plz explain that why do we debit accumulated depreciation when we revalue assets
It is to remove the existing accumulated depreciation, so that we can ‘start again’ with no depreciation and the ‘cost’ having been changed to the revalued amount.
Hi John
Still on the same question. Using T accts, with a cost of $185000 less Accum.Depr of $55000, the carrying amt should be $130000. This leaves us with a discrepancy of $44400,ie $130000-$85600. Then there’s an addition of an asset of $30000 and a “loss on sale?” ie $25600 (asset disposal,debit) less accum.depr of $11200, giving a balance of $14400. This seems to add up but I wouldn’t be very sure that I would have to add the $14400 to the $30000 to explain the discrepancy. How could U clear my confusion?
RegardsIn the t-accounts, the carrying value is 130,000.
However the disposal has not been recorded in the t-accounts. The carrying value of the assets disposed off was 14,400.
Therefore the carrying value in the t-accounts should be 130,000 – 14,400 = 115,600In the asset register, the value is 85,600.
However the purchase has not been entered in the register.
Therefore the correct total in the register is 85,600 + 30,000 = 115,600(We do not know the profit or loss on sale because we do not know the sale proceeds. The profit or loss on sale is irrelevant anyway because what we want is the correct value of the assets remaining.)
gusna co purchase a building on the 31 dec 2001 for 75000 at the date of acquisition the usful life of the building was estimated to be 25 yrs and the dep is calculated using the straight line method at the 31 dec 2006 an independent valuer valued the building at 1000000 and the revaluation was recognise in the financial statement gunas accounting polices state that excess depreciation arising on revaluation of the non current assets can be transferred from the revaluation surplus to retain earning
what is the depreciation charges on the building for the year ended 31 dec 2007
Please don’t simply set questions.
You must have an answer in the same book in which you found the question, and so ask what problems you have with the answer.The new revaluation is based on the revalued amount, and this is what appears in the Statement of profit or loss.
The excess over the new depreciation and the old depreciation is transferred from the revaluation reserve to the retained earnings (but this does not affect the amount appearing in the Statement of profit or loss).
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