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Reply to the below

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Reply to the below

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 4, 2017 at 9:02 am #384818
    richard
    Member
    • Topics: 11
    • Replies: 6
    • ☆

    Richard

    Participant
    Hi Sir,

    I am getting stuck on the below.

    Nimoy purchased an item of heavy industrial machinery for 90k on 1Oct X5. It had an estimate useful life of 10 years and a residual value of 5K. Plant and machinery is depreciated on a straight-line basis.

    On 30 Sep X8 Nimoy revalued the industrial machine to 75K in accordance with a change in policy for the measurement of tangible fixed assets. Nimoy decided to undertake the annual revaluation reserve transfer.
    The tax authorities do not allow depreciation as a deductible expense. Instead, tax relief is granted based on an allowable deduction of 30% of the cast of the asset in the year in which the asset is acquired followed thereafter by an annual allowable deduction of 15% calculated on a reducing balance basis. Revaluations do not affect the tax base of the asset.

    The applicable rate of income tax throughout is 20%

    What is the value of the industrial machine and the associated revaluation surplus in the SOFP? (ignore any deferred tax)

    | QUOTE May 4, 2017 at 8:44 am
    Profile photo of MikeLittle
    MikeLittle

    Keymaster
    2 points:

    1) why have you told me about the capital allowances?

    2) you haven’t given me the reporting date

    As at 30 September, 2008 the tax written down value is 38.69,

    the carrying value of the asset is $75,000 and the

    revaluation reserve is $12,000

    Is that enough for you?

    Reply – The question is for Carrying amount and RR for 30 Sep 20X9?

    I had different numbers to you. Could you explain how you got there?

    May 4, 2017 at 11:18 am #384825
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23309
    • ☆☆☆☆☆

    Hmm, I missed the residual value element

    Carrying value is adjusted to $75,000 as at 30 September, 2008 and tax value is $45,520 as at 30 September, 2008

    Now you tell me that you want values at 30 September, 2009

    Carrying value falls to $65,000 and tax value falls to $38,690

    Revaluation reserve at 30 September, 2008 is adjusted to $10,500 and as at 30 September, 2009 this falls to $9,000 after the transfer of the excess depreciation ($10,500 / 7)

    What figures did you get?

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