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Ask the Tutor ACCA SBR

Excess depreciation

MFMohammad Fazal6y ago
Could you clarify what happens to the excess depreciation incurred due to a revaluation upwards of a NCA? I understand it gets transferred to the retained earnings Do we add it to the RE or deduct it? Journal entries if possible Thanks in advance Chris
P2-D2P2-D2Tutor6y ago#1
Hi, Yes, it is treated as a reserve transfer from the revaluation reserve to retained earnings. The entries would be: DR Revaluation reserve CR Retained earnings If there isn't an example covering this in the SBR lectures then there is one in the FR ones. Thanks
MFMohammad Fazal6y ago#2
Thank you sir, One last thing, Regarding convertible debentures; what if we base our calculation of PV of liability AFTER subtracting issue costs? as opposed to pro rata allocation afterwards I tried to do it but I got an incorrect figure (Chapter 15; lecture 4; eg 4) What is the logic behind this Thanks in advance Chris
P2-D2P2-D2Tutor6y ago#3
You cannot subtract issue costs in the PV calculation as you do not know how much will relate to the debt element and how much to the equity element. Once you have done the standard calculation you can then pro-rate the issue costs across the two elements of the convertible. Thanks
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