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Dear Tutor,
In question 6 Harrington (BPP exam revision kit) the profit on disposal is put into the cost of sales. Is it normal to do that?
Where else can this appear in the fin.statements please?Many thanks,
ValentinaI usually put it along with all the other expenses and income, ex: Investment income, Gain on Fair Value of assets… etc, as a separate entry stating profit on sale of asset, I don’t know How i missed this on the BPP kit, I did it, maybe my SOFP tallied at the right amount so I didn’t check the figures and their placements.
Thank you, vedavyas!
Don’t you put gains on revaluation in the statement of comprehensive income?Yes, I normally put profit on disposal somewhere in my income statement, but certainly not in the cost of sales!!! I don’t get it…..
it shouldn’t go into the COS because only things related to sales go there and Depreciation, I don’t understand their logic, my SOFP’s tally after I correct some mistakes 😛 this wasn’t one of them hahaha… Why don’t you come on the chat I will be online there for the next few hours say 2-3 hours. We can help each other out there….
at the bottom of page 6 in the rev kit, you’ll see that all depreciation is charged to cost of sales. If you accept that a gain on disposal is simply an adjustment for over / under depreciation from prior years, it makes sense to put the gain / loss also to cost of sales
Dear Tutor,
Thank you for your reply 🙂
Profit on disposal is an adjustment for over or under DEPRECIATION from prior years???????? How so? And how do I know when to treat profit on disposal as depreciation and when not?
Thank you very much in advance for your clarification.
Have a wonderful day!
ValentinaDear vedavyas,
I am sorry I’ve just seen your message. How do you sign in for a chat on this website? I’ve never used this function before… I would love to chat. Where are you based geographically? I am in California, 8 hours behind London.
Cheers!
ValentinaWell I’m in India 5 and a half hours ahead of UK, so basically we haev 13 and a half hours between us but I am mostly on at night ( India time, around 9pm onwards either in the F5 room or F7, depending where the people are at)
@mikelittle said:
at the bottom of page 6 in the rev kit, you’ll see that all depreciation is charged to cost of sales. If you accept that a gain on disposal is simply an adjustment for over / under depreciation from prior years, it makes sense to put the gain / loss also to cost of salesOh okay now I get it, but what I’ve been doing this whole time was it wrong ?
@valentina : go to chat.opentuition.com, put your username and password an your in, we had a chat with Mike last night it was the last one with him though, 🙁
Anyway try to come online … will see you in the chat room then..@valentinat171 said:
Thank you, vedavyas!
Don’t you put gains on revaluation in the statement of comprehensive income?Yes, I normally put profit on disposal somewhere in my income statement, but certainly not in the cost of sales!!! I don’t get it…..
When there is in an increase in the Fair Value of Investments held for Sale you put it in the SOCI, when there is a gain on Investments held through profit or loss you put in the SOI, when there is a reval gain you put it in the SOCI…. That is my understanding … Hope I’m not wrong. I’m quite sure I’m not …..
Yes, you are right. You revaluation gains does go to SOCIE, but it also goes to your statement of comprehensive income.
I still don’t understand how profit on disposal is an adjustment for over or under depreciation from prior years? Can anyone explain it to me please?????
Is that not what a profit on disposal represents? Surely, there’s a profit because we have depreciated it too much during its years of use. As to where to show it, follow the examiner’s instructions! In Harrington, the examiner specifies that all depreciation should be charged through cost of sales. So that’s where I would put the profit / loss on disposal.
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