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It says in the question that INCLUDED in PPE is a coal mine purchased by Minster; it also says that the environmental provision of $150,000 is included in the carrying amount of the mine. Then why, in the PPE account (I’m studying BPP’s solution) is the environmental provision added to the existing carrying value?
Thanks.
I don’t remember it being added – and I worked through that question today!
Are you studying off BPP?
Anyway i posted this in the Ask the Tutor group (https://opentuition.com/groups/ask-the-tutor-acca-f7-exams/forum/topic/help-%E2%80%93-minster-cash-flows-dec-06-bpp-q80/), and got this answer:Quote:valentinat171 said 4 hours, 30 minutes ago:Oh, I see. I’ve just looked at it and this is what I think.
the PPE-carrying value working you are looking at starts with the opening balance of 940. This is at 30 September 20X5. The mine was purchased on 1 October 200X5, that’s why they added it.
hope it helps.
ValentinaIt makes sense now; the provision wasn’t a cash outflow, and therefore was segregated in the ledger account so it wouldn’t be included in the cash flows from investing activities. At least, that’s what I understood from it.
yes, and I commented on ask the tutor that Valentina’s was a good explanation.
Please, in future, don’t post your questions in BOTH the forum and ask the tutor – it takes me twice as long as necessary to answer them all.
One or the other, but not both
sorry, i’m new to open tuition, thought they were two separate forums altogether!
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