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Hi Dear Tutor, Why we do not record 50 cost in the credit side of non current asset account instead we record 20 cv .this part is a bit confusing for me
In your asset disposal example ( PPE chapter) you usually disposed it of at original cost 15000-I am talking about in your prior chapter. When we get profit or loss on disposal we use net book value minus sales proceed but we record the original cost when the asset bought. I hope you got it where is my confusion between ppe chapter example and statement cash flow chapter example 2
When recording sales and purchases on non-current assets in the accounts, we need to deal with the cost account and the accumulated depreciation accounts separately.
However, in the statement of cash flows example, we are only writing up the accounts as workings and if we do not know the details of the cost and accumulated depreciation balances separately (as is often the case in exam questions) we are only able to do the workings on the carrying values (i.e. cost cost les depreciation balances).
Dear tutor in your statement cash flow example note 2 says that
During the year there had been sales of non-current assets for $30,000. The assets sold had
originally cost $50,000 and had a net book value of $20,000. The original cost is 50k and the net book value (carrying value) is 20k. 50k-20k=depreciation 30k.your calculation———————–my calculation
asset bf-410k—————————–410k
disposal (20k)——————————(50k)
depreciation (40k)————————(40k)
acquisition 195k—————————225k
c/f 545k—————————————545kthe only difference with 20k and 50k.
but I calculated without watching your lecture and when reconciled it with your lecture video I saw you calculated different from mineI think 50k should be disposed of as it is the original cost of the asset which is 20k net book value.
I agreed with the way that you say if the note would have not showed 50k(original cost) but in fact it showed the original cost of asset whose net book value is 20k.
I really need widespread clarification for this part to get it betterThe 410K brought forward is not the cost of the assets but is the net book value of the assets at the start of the year.
Therefore when an asset is sold we need to subtract the net book value of the asset sold in order to arrive at the new net book value of the assets remaining.
(We know that 410K is the net book value at the start of the year because it is appearing on the SOFP as just the one figure – we are not given the breakdown of the cost and accumulated deprecation at the start of the year).
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