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- May 15, 2010 at 7:25 am #43844AnonymousInactive
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I have got some problem in calculating the Land & building additions in the cash flow question. The link is attached and the question (Q 4) can be viewed there clearly.
June 2005 Q 4The following supporting information is available:
(i) Details relating to the non-current assets are:
Property, plant and equipment at:
At 31 march 2004 Land and Buildings
Cost/Valuation = 500; Depreciation = 80 ; Carrying Value = 420
At 31 march 2004 Plant
Cost/Valuation = 445 ; Dep = 105 ; Carrying Value = 340At 31 march 2005 Land and Buildings
Cost/Valuation = 600 ; Depreciation = 12 ; Carrying Value = 588
At 31 march 2005 Plant
Cost/Valuation = 440 ; Dep = 148 ; Carrying Value = 292Casino revalued the carrying value of its land and buildings by an increase of $70 million on 1 April 2004. On
31 March 2005 Casino transferred $3 million from the revaluation reserve to retained earnings representing the realisation of the revaluation reserve due to the depreciation of buildings.
During the year Casino acquired new plant at a cost of $60 million and sold some old plant for $15 million at
a loss of $12 million.This is how i go on to calculate the Additions
First calculating dep.
80-70-12= 2 Depreciation charge for the year
Now if i make land and building account based on {cost} not {carrying value} to calculate additions to the land and buildings during the current year then it should just be 600 -500 = 100.
Likewise calculating it through NBV method additions will be
420 + 70 – 12 – 588 = 110 Additions
Now see the difference of 10? between the two methods. i can’t figure out why this occurs. Actual additions are 110 whereas if i were to calculate it through Land and Building cost account in the exam i would have been wrong. My mind has stopped working for now. maybe m doing some silly mistake. Please Let me knowMay 17, 2010 at 5:49 am #602601 April 2004 Cost = 420 + 70(revaluation) = 490
Any increase would be due to addtions.
So additions = 600 – 490 = 110
Not sure how you got 500.May 17, 2010 at 4:36 pm #60261Please remember that now you can not take the cost of 500 at the 31 Mar. 20040
to caculate the addition of land and building. If no revaluation you calculate like this it is o.kBut when there is revaluation at 31 Mar. 2004 you have to take the new cost of land and building
That is 420+70=490 (You compare with 500 is completely wrong)
Therefore the difference 500-490=10
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