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The investment through p&l should’nt the increase in fair value be(1900) :
value at 1 Apr 2014 6000
(-)disposal value(carrying amount) (1400)
increase in fair value 1900
_____
fair value at 31 March 2015 6500Why in the answers they have compared the 6000 with 6500 and arrived at a the increase as 500?
The question specifically says that the investments held at March 2015 are those investments that were held AFTER the disposal of carrying value $1.4m investments
Those still remaining are in the trial balance at their 2014 valuation and the value as at 2015 is an increase from $6,000 to $6,500 and that’s why the gain in value is just $500
Be careful with that “AFTER the disposal”
ohh.ok
but the trial balance shows value at 1 Apr 2014(beginning of the year) and the additional information says the disposal happened during the year,so that means after 1 Apr 2014,then how come it is only 500.If the 1st sentence says it is after sale,then in the TB shouldn’t they state the date as 31 March 2015
The trial balance is extracted at the end of the year. The disposal during the year will have been recorded by deducting the carrying value of the investment that was sold. The only investments left at the end of the year are those shown in the trial balance together with their values as at the start of the year.
This is the way that trial balances work – thet are lists of account balances extracted after all the year’s double entries have been recorded
Ok?
It’s the second year element of the $1m lease premium being spread over 4 years. The first year is expensed this year, the second is the current asset that you ask about and years 3 and 4 are shown as a non-current asset
OK?
Too dangerous to make a generalization like that. If there’s a premium paid on an operating lease (Dr Premium, Cr Cash) that premium needs to be spread over the life of the lease – just like depreciating it on a straight line basis)
The first year will be expensed, then, at the end of the first year, the second year will be realized within the next 12 months so will be treated as a current asset with the years beyond treated as non-current assets
Ok?
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