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Cost Model

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Cost Model

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  • August 21, 2021 at 4:42 pm #632434
    chelleyness
    Participant
    • Topics: 2
    • Replies: 2
    • ☆

    Hi. Referring to Q1 of March/June 2021 PYQ, how does the cost model affect retained earnings?

    From the answer, “– Retained earnings would increase by $1,000,000 to $3,600,000.”

    Could you please explain how does this come about? Thankyou!

    August 29, 2021 at 10:55 am #633346
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    Hi,

    Under the cost model the property would not have been revalued to $30m and so the higher depreciation of $1m ($30m/30 years) would not have been charged. If it was not charged then the profits and therefore retained earnings ill both be higher.

    Thanks

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