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Hi, for sample answer part (a), I understand that the figures under interest payable, additional interest payable, interest saved, return on additional investment, and return lost on reduced investment are taken into account in both current assets & retained earnings in the forecast financial position, but please may I know why the profit on sale of non-current assets ($2,000) is only taken into account in retained earnings, but not the current asset as well?
Thank you.
I am on vacation until Tuesday evening and do not have the Revision Kit with me. Please ask again in Wednesday and I will then be able to answer you.
Hi, good day. Hope you have had a great vacation. 🙂
Please may I continue with the discussion? Thank you.
Firstly, the double entry when the asset is sold is:
DR Cash with the proceeds of 27,000
CR Non-current assets with the book value of 25,000
CR Retained earnings with the profit on sale of 2,000.Secondly, it doesn’t affect the current assets because the questions says that the proceeds of 27,000 are used to reduce the company’s debt, so CR Cash and DR non-current liabilities with the 27,000.
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