- March 1, 2022 at 7:40 pm #649586
Could you kindly correct my mistake here please.
On 30 September 20X3, Maykorn Co moved out of one of its properties and put it up for sale. The property met the criteria as held for sale on 30 September 20X3. On 1 October 20X2, the property had a carrying amount of $2.6m and a remaining life of 20 years. The property is held under the revaluation model. The property was expected to sell for a gross amount of $2.5m with selling costs estimated at $50,000.
What is the total amount charged to Maykorn Co’s profit or loss in respect of the property for the year ended 30 September 20X3?
correct answer given is 180,000
CV(2.6-(2.6/20)= 2.6-0.13= 2.47
FV-COS= 2.5-0.05= 2.45
Lower of CV and RA is 2.45
Depn = 0.13
Impairment = CV-RA= 2.47-2.45= 0.02
Charge to p&L =0.02+0.13= 0.15million
My answer is 150,000March 2, 2022 at 5:25 pm #649662kk-@Member
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Carrying amount of asset is 2.47m
Fair value of asset is 2.5m
Cost to sell is 0.5m
We are using revaluation model
Always remember when we use revaluation model , then at the time of classification of asset as held for sale we will revalue asset , the revaluation gain will be recorded at oci and cost to sell will be recorded as impairment cost in p&l
Lower of carrying value and fair value less cost to sell can be applied only on cost model not revaluation model
So revaluation gain = 0.30m(2.5-2.47 )
Which will be recorded at oci
Depreciation for the year = 130000
Cost to sell ( impairment ) = 50000
Total charge to p&l = 180000March 2, 2022 at 6:46 pm #649675
Thank you so much for your detailed explanation sir.
I guess I haven’t done much exercise on revaluation model of NCA held for sale.March 3, 2022 at 8:00 pm #649766P2-D2Keymaster
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You don’t regularly see it at this level but it is something to be aware of just in case.March 3, 2022 at 9:44 pm #649776
Thank you sir, It is worth noting.March 8, 2022 at 9:54 am #650208mehakjesraniMember
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As at 1st January 20X5 the factory was valued at cost $14 million, less accumulated depreciation $3 million. During October to December 20X5,it was marketed by a property agent at a price of $13 million, which was considered a reasonable achievable price at that date. The expected costs to sell have been agreed at $500,000 . Recent market transactions suggest that actual selling prices achieved for an industrial building of this nature in the current market conditions are 10% less than the price at which they are marketed.
At 31st December 20X5 the factory remained unsold.
At what amount should the factory be reported in Skybound Co’s Statement Of Financial Position as at 31st dec 20X5?
Carrying Amount = 14-3 = 11 million
Fair Value Less Costs to sell = (13×90%)-0.5
= 11.2 million
As the carrying amount is lower ans should have been 11 million
But the answer in mock is 11.2 million
Sir can you please explain my mistake.
THANKYOUMarch 12, 2022 at 8:23 am #651122P2-D2Keymaster
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Not sure where the question has come from but there looks to be an error in that they have not depreciated the asset from January to December first of all, and ignoring that then the asset should be held at the lower of the carrying value and FVLCTS. In this instance it would be the 11 million and not the 11.2 million as stated.
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