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Hi tutor, I don’t understand the meaning of this sentence:
The company revalued the carrying amount of its property upwards by $5m, the accumulated depreciation on these properties of $2m was reset to 0.The revaluation amount (to be charged to the revaluation surplus) is $3m, instead of $5m. What event causes the accumulated depreciation to reset itself to 0?
Hope to hear from you, thanks!Sorry I have another question:
Can government grants be amortized? If yes, do we add, or do we subtract, the amortization cost to or from the carrying amount of the deferred income?
Sorry again, how should accrued finance costs be accounted for in the statement of cash flows?
Taken from ACCA December 2013 Kingdom Co:
Accrued finance costs @ 20X2 = 50
Accrued finance costs @ 20X3 = 100
Finance costs in SPL: 600Interest paid reflected in the SOCF:
(600-100+50)I don’t understand the working of interest paid.. what I know is that an increase in accrued finance costs would mean that the company has $50 more in interest payments payable in the future. Though it doesn’t involve a cash outflow, it will still have been taken as an expense in the SOPL, and so in my SOCF I added “increase in accrued finance costs- 50” in the adjustment section of the SOCF. But I’m really not sure of this..
“I don’t understand the meaning of this sentence:
The company revalued the carrying amount of its property upwards by $5m, the accumulated depreciation on these properties of $2m was reset to 0.The revaluation amount (to be charged to the revaluation surplus) is $3m, instead of $5m. What event causes the accumulated depreciation to reset itself to 0?
Hope to hear from you, thanks!”“The revaluation amount (to be charged to the revaluation surplus)” – the amount going to the revaluation account on the event of an increase in valuation is not CHARGED to the revaluation reserve
I don’t know if you are aware of the fact that the word “charged” is a technical accounting expression and is the direct opposite of “credited”
The word that you are looking for in your post is “credited” as in “credited to the revaluation reserve”
The double entry for the $5m revaluation is:
Dr TNCA 5,000,000
Cr Accumulated Depreciation account 2,000,000
Cr Revaluation Reserve 3,000,000It would clearly be in your best interests to work through the F3 material and follow John Moffat’s video lectures!
OK?
“Can government grants be amortized? If yes, do we add, or do we subtract, the amortization cost to or from the carrying amount of the deferred income?”
The receipt of a government grant (possibly) involves the double entry:
Dr Cash
Cr Deferred IncomeEach year and amount of that grant will be taken to the profit or loss account with the double entry:
Dr Deferred Income
Cr Profit or LossDoes that answer your question?
“Sorry again, how should accrued finance costs be accounted for in the statement of cash flows?
Taken from ACCA December 2013 Kingdom Co:
Accrued finance costs @ 20X2 = 50
Accrued finance costs @ 20X3 = 100
Finance costs in SPL: 600Interest paid reflected in the SOCF:
(600-100+50)I don’t understand the working of interest paid.. what I know is that an increase in accrued finance costs would mean that the company has $50 more in interest payments payable in the future. Though it doesn’t involve a cash outflow, it will still have been taken as an expense in the SOPL, and so in my SOCF I added “increase in accrued finance costs- 50” in the adjustment section of the SOCF. But I’m really not sure of this..”
Have you (please tell me that you have) watched the video lecture on cash flows?
No? Then please do so, now
Yes? Then do you remember me saying the mantra “brought forward, income statement, carry forward, cash” … on numerous occasions?
Open a T account
Put in the brought forward liability
Put in the entry to record the income statement affect (profit or loss statement)
Put in the carry forward liability
The missing figure is cash
Now, if you’re struggling with which side of the T account to put in these entries …. go and watch John Moffat’s video lectures for F3!
OK?
Thank you Mike! I knew I needed to brush up on my T accounts but I didn’t know F3 had them covered. It was close to 6 years since I last did it. I’ve watched some of the F3 lectures and am able to understand them now.
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