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Lets say a real estate company have been doing business for 1 year, they own $2000 worth of houses and accum depreciation is $200. They only rent their houses all year, BUT they decided to put a house on sales at the end of the financial year. Lets just say the house’s value is 200 and depreciation for the year for this house is 20. So what is the journal entry for this?
1) Do i just Dr closing inventory 200, Cr houses 200 ? But if i did this, what about the 20 depreciation for this particular house, do we ignore it?
2) After i do the reclassification, Dr closing inventories, do we need to put this in income statement’s Less: closing inventory? If thats the case, their COGS will be Opening inventory(0, since they dont have inventory until today) – Closing inventory(200) = -200
This is not in the syllabus for Paper FA.
You could only be asked to account for the sale of a non-current asset, and the entries for this are explained in full in my free lectures on non-current assets.
Hi, John. I have watched your vid about the disposal but currently the project that my teacher assigned to me needs the fixed assets to transfer to inventory, as in the fixed assets are ready to be sell, but no buyer at the moment. So we just inventory the fixed assets. I would be glad if you could check to see if there are any error in my journal entry or financial statement. Link: https://imgur.com/a/x2eru5S
In this project, im acting as a owner as the new opening real estate company. For the first year, all the houses are for rent, and 2 of the houses are to be transfer to inventory for sales at the end of the year. No buyer at the moment.
1. The 2 and 3 requirement is the one im struggling with. Which requires me to reclassify the fixed assets to inventory. Then one of the inventory(house) has NRV 10% lower than normal price, so i assume that we must write off the excess amount.
2. As you can see i have 2 working for SOCF which i dont know whether which is wrong or correct. BUT, i watched your video about SOCF, and i realized that the “increase inventory” under operating activities should be (3000) as per SOFP stated, but using (3000) will make the cash equivalent not tally which is weird.
ACCA probably don’t have this in exam but my teacher assigned this to me as project. I apologize in advance if this isnt the place to ask this question.
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