Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IAS 16 PPE
- This topic has 9 replies, 2 voices, and was last updated 8 years ago by
MikeLittle.
- AuthorPosts
- December 24, 2016 at 4:30 pm #364396
Dear sir,
If the asset would have an estimated residual value, will it be shown in financial statements?
If so, then how?
December 24, 2016 at 8:48 pm #364404No, and therefore your supplementary question is not applicable
December 24, 2016 at 8:53 pm #364408Thank you sir 🙂
December 24, 2016 at 9:06 pm #364412You’re welcome
December 25, 2016 at 11:14 am #364431Sir, could you please explain the following question?
The company’s building was acquired on 1 January 2002 for $2,000,000. It had an expected useful life of 40 years with no residual value. On 31 December 2005, it was revalued at $2,160,000. It was disposed of for $1,720,000 on 31 December 2006.
Prepare journal entries
I’m having trouble understanding the depreciation part of this question.
Would it be 2,000,000 / 40 = 50,000 for 4 years(2002-2005) and then 2,160,000 / 36 = 60,000 for 2006?
December 26, 2016 at 11:56 am #364458That’s exactly right … where do you think that you’re having trouble understanding that calculation?
And there’s a credit into the revaluation reserve on 31 December, 2005 of $360,000 followed on 31 December, 2006 by the removal of that credit to set off against the loss of $380,000
OK?
Incidentally, it appears that the directors MAY be guilty of a little bit of manipulation here! If the building had NOT been revalued on 31 December, 2005 and had been sold on 31 December, 2006 for $1,720,000 there would have been a loss on disposal to be accounted for of $30,000 in the year to 31 December, 2006
December 26, 2016 at 12:17 pm #364463So the journal entry for this would be
Dr Revaluation surplus 360,000
Dr Loss on disposal 20,000
Dr Cash 1,720,000
Dr Accumulated depreciation 60,000
Cr Asset 2,160,000Is this right?
December 26, 2016 at 12:23 pm #364465Yes, that works
It would be more “normal” to have 2 or 3 separate less convoluted journals rather than a single composite masterpiece, but, as I said, it works
December 26, 2016 at 12:29 pm #364469Thanks a ton sir!! I don’t know what I would have done without opentuition! Thank you 🙂
December 26, 2016 at 12:40 pm #364472You’re welcome
- AuthorPosts
- You must be logged in to reply to this topic.