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First.
Weblock inc purchased land and building worth 80,000$ out of which the cost of land was 30,000$. The profits earned for the year were 115,000$. Depreciation was charged bu the company at 2% under the straigh line method on buildings. The accountant also charged 20% depreciation on the land and buildigns?what are the correct profits after rectification of the above error?
A) 114,000
🙂 99,000
C) 100,000
D) 117,000Second.
Creative purchased 10000 units at 5$. out of this 6500 units are sold at 8$. Considering matching principle how much should be considered as cost of sales?
A 50000
b 52000
c 60500
d 80000shoud not it be 50000-17500= 32500 ?
@joseph89 said:
First.
Weblock inc purchased land and building worth 80,000$ out of which the cost of land was 30,000$. The profits earned for the year were 115,000$. Depreciation was charged bu the company at 2% under the straigh line method on buildings. The accountant also charged 20% depreciation on the land and buildigns?what are the correct profits after rectification of the above error?
A) 114,000
🙂 99,000
C) 100,000
D) 117,000My first possible answer :
Unadjusted profit ……………………. 115,000
Extra depreciation ……………………. 16,000 ( 80,000 * 20% )
Adjusted profit ……………………….. 131,000And second possible answer :
Unadjusted profit ……………………. 115,000
Wrong depreciation ………………….. 16,000 ( 80,000 * 20% )
True depreciation …………………….. ( 1,000 ) ( 50,000 * 2% )
Adjusted profit ……………………….. 130,000yes exactly I had the same answers but neither of them is in the list…
so I thought that there is an error.Dear littlestart
Could you please explain that why you deducted the wrong depreciation charge and added the true one to the profit figure?
I’m sure you know that depreciation charge has a decreasing effect on the profit figure so if there is any wrong depreciation in the calculation of profit, definitely, the wrong figure should be added to profit then the true charge will be deducted.Good luck
Dear Mahdiniaacc,
I am not sure about the answer as well. Need Joseph89 to give out the correct answer. If I met this question in the exam, I will choose option C
CheersOf course, we should not leave the questions in exam without answer ( as the wrong answers do not have any negative mark ) but here we are talking about the true answer regardless of options that given in the question.
Thanks for your kindly participation
First man, I am not sure about my answer.
Guess option C
It said ‘Depreciation was charged bu the company at 2% under the straigh line method on buildings. The accountant also charged 20% depreciation on the land and buildigns?’
Guess the 2% depreciation was charged in wrong, so I added it back to correct the balancenow deduct the real depreciation charge which is on the 20% base.
really not sure about this one.
CheersHmmmmmmmm, good point
Thank you littlestart for your good view.
As far as I understood from your answer, you assumed that the purchased land and building both are depreciable but I think it’s not true because this land is not a property which will be depreciated. mineral land is an example about a depreciable land but land of business’ buldings is not a depreciable property.Good luck
mahdiniaacc is right. and I don’t have the answer. and what you think about the second question?
both this questions are from the mock exam.(but not from bpp or kaplans books)Yes, he is right. About the second question, I got the same answer as you. Good luck
hey i have a doubt!!
so that means if a building is depreciated u dont post the NBV in the SoFP??suppose,
Land n Building (1.1.2001) (cost) 430.000
Accumulated depreciation (1.1.2001) 20.000Adjustments:
The property was acquired some years ago. The building element of the cost was estimated at $100.000 and the estmimated useful life of the asset was 50 yrs at the time of the purchase. As at 30.12.2001 the property was revalued at 800.000what will be the amount in the SoFP?
thanks littlestart . good luck to you too.
sorry plen but have you posted correctly? because my question doesn’t involve SOFP. it needs an adjustment to profit.the answer to your question is that in SOFP for sole trader we put NCA with it cost less accumulated depreciation which will give us NBV of NCA. in a company we will put only NBV and cost and accumulated depreciation is disclosed in notes ( as I know, maybe I’m wrong).
so in sofp you put your property with revalued value 800000 and if it have been depreciated less depreciation.
also as I remember there in capital section there will be revaluation reserve.Hey Joseph thank u so much. if any of u wanna take a look at the question, u can find it in BPP pg 365
I wish u and every1 all the best
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