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Hi Sir
There is a question on the studyhub (Q – Dearing Co)
For part 3 of this question i read the answer working and could not understand what was meant by “Of which $125,000 will be credited to profit or loss as a reversal of previous loss.”
For part 4 of that question i also could not understand why this is considered an expense “Dearing Co’s office building has been badly damaged by a fire. Dearing Co intends to restore the building to its original condition at a cost of $250,000” is this not an asset
Thanks for your time and consideration
Hi,
If the loss has previously been taken through profit or loss then the reversal of this loss will therefore be taken to where the loss was taken, so in this instance profit or loss.
No, there isn’t an asset as we’ve not incurred any cost yet of rebuilding the building. Once we restore the building then it is likely to be repairs.
Thanks
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