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Hi mike
I will try not to have a question on every question, sorry about this
In question 5 for the impairment of the leasehold property, the previous years charge to impairment losses was 2.8 million and the revaluation was from 30m down to 25.2 million, was the extra 2m in the calc for depreciation? (maybe straight line dep over 15yrs)
I suspect i am wrong though as there is no accum dep for leasehold property in the trial balance and the 300k debited to impairment losses in year 2 in the solution does not seem to be taking into account any depreciation?
sorry if I am misreading it
Cheers
Hugh
The note starts with “the 15 year leasehold property was acquired on 1 April 2008 at cost of $30 million”
That tells you that it has a 30 year life. If it was bought on 1 April 2008 and its carrying value in $25.2 million 1 year later, surely that means that depreciation for the year ended 31 March 2009 is reflected in the carrying value as also is the $2.8 million impairment. And that’s why there’s no figure for accumulated depreciation for the leasehold property shown in the trial balance
The $300 is a net figure. Depreciation for the year to 31 March 2010 is $25.2 / 14 years = $1.8 million that brings carrying value down to $23.4 million but the values tells us that it’s worth $24.9 million so we can / must credit the p or l with the difference of $1.5
Depreciation $1.8 million and reversed impairment of $1.5 million gives you the net figure of $300,000
All clear?
Thanks Mike, yes
Would another way of writing it be:
Dr dep expense (soci) 1800
Cr asset (accum dep) 1800Dr asset 1500
Cr impairment (soci) 1500Or is it more correct to net them?
In practice? They would be lumped together with all other administrative expenses and shown as a single figure with a breakdown in the notes.
In particular, the TNCA note would identify depreciation, impairments, impairment reversals, disposals, additions, revaluations all on separate lines
In an exam, show 300 ( but then, in brackets, show 1,800 – 1,500)
Ok?
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