- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
Hello!
Could you help me with Chapter 3, please?I’m looking at answer for Example 1 – Statement of Income and don’t understand the logic of receiving of Impairment loss (25). I think it is misunderstanding of iii point…
Looking forward your reply!
Thanks!Yes, you’re correct – it’s a misunderstanding of point (iii)
This is from the question:
“A non-current asset with a carrying value of $130,000 was written down to $95,000. The impairment occurred as a result of general price changes. The revaluation surplus account contains $25,000 relating to this asset.”
When we’re faced with impairing an asset that has, in the past, been the subject of a revaluation increase, we must first of all use up that revaluation surplus (sitting in the Revaluation Reserve)
If the impairment exceeds that element of the Revaluation Reserve, then we take the excess to Statement of Comprehensive Income
So we need to write off $35,000 from this non-current asset. Step by step this would involve:
Dr Revaluation Reserve $25,000
Cr TNCA $25,000and then …
Dr Statement of Comprehensive Income $10,000
Cr TNCA $10,000How’s that?
- The topic ‘Chapter 3 Example 1’ is closed to new replies.