- This topic has 18 replies, 2 voices, and was last updated 6 years ago by
.
- Posts
For the transaction below, the answer i got for the interest on the secured loan is 360. Which tally with the answer key. But, i dn understand why this interest of 360 isnt added to the interest paid figure on the trial balance. Issit because the figure on the trial balance is already paid?
On trial balance : interest paid 2880
Transaction: revenue includes cash sales of 12000 of goods sold in august 20×8 to randy plc, a bank. The goods are marked up at a 25% on cost. Randy has the option to require Opal to repurchase these goods on 1 November 20×8 at their original selling price plus a one off fee of $360 000. Randy has not taken delivery of the goods, and has always made opal repurchase goods in the past under similar agreements.
You clearly have not given me complete information! Where’s the question from? Is it an October 2008 year end?
If it’s a “true” trial balance ie a list of balances extracted before the year-end adjustments of accruals and prepayments are made, then the 380 will not be in the figure 2,880 because that represents interest PAID and this 380 is not due for payment until “tomorrow”
But it may not be a true trial balance and the 380 could already have been accounted for:
Dr Interest paid 380
Cr Randy Bank loan 380In fact, that looks like that could be the case here because 380 deducted from 2,880 leaves a nice round 2,500 which could well be the 10% interest on a different 25,000 obligation
But until you give me proper information, I can only throw out wild guesses!
For the following transaction below on PPE, we need to account for excess depreciation right. And the amount that is required to be transfered to RE is the RR 3000/remaining UL 15years = 200 right .
But the answer key on the SOCIE for the transfer to RE shows 3000. Why ?Transaction: included within PPE is a building with a CV of 9000. On 1 november 20×7 it was revalued at 12000. The building had an estimated life of 25 years when it was purchased 10 years prior to the revaluation date. This has not changed as a result of the revaluation. The directors of Opal wish to incorporate this valur in the financial statements for the year ended 31 oct 20×8.
All other PPE is depreciated at 20% per annum on the reducing balance basis. All depreciation is to be charge to Cost of sales.
Trial balance:
CV of PPE at 1 nov 20×7 270 000And im consused on whether this is the only PPE. Or the PPE on trial balance consist of the building and also others ?
Where’s the question from?
Are you 100% sure that the transfer is from Revaluation Reserve to retained earnings and isn’t from Retained Earnings to Revaluation Reserve?
Its not a past year exam qn. Its a mock exam paper given by my lecturer. Yes im very sure because under the RR column its 0. Even when the RR column is empty the total at 31 0ct 20×8 still shows 3000. Omg. I think this answer key has errors.
Or could you give me your email adress so that i can send you the mock exam document. Then you could help me out from there ? Because my lecturer literally takes 2 weeks to reply enquiries .
Anuja, I’m not going down that route! Before I know it I shall have questions from around the Globe on my email!
Can you scan the question, copy it and post it on this page?
Question 3 Opal is a well-known company manufacturing thrill rides. During the current economic climate, Opal has experienced some difficulties and unfortunately has had to close down its Merry Go Round division. The company’s trial balance at 31 October 20X8 is as follows:
Carrying value of PPE at 1 November 20X7 270,000
Note 1 Revenue includes cash sales of $12 million for goods sold in August 20X8 to Randy plc, a bank. The goods are marked up at 25% on cost. Randy has the option to require Opal to repurchase these goods on 1 November20X8 at their original selling price plus a one-off fee of $360,000. Randy has not taken delivery of the goods, and has always made Opal repurchase goods in the past under similar agreements.
Note 2::Included within property, plant and equipment is a building with a carrying value of $9 million. On 1 November 20X7 it was revalued at $12 million. The building had an estimated life of twenty five years when it was purchased ten years prior to the revaluation date. This has not changed as a result of the revaluation. The directors of Opal wish to incorporate this value in the financial statements for the year ended 31 October 20X8. All other property, plant and equipment is depreciated at 20% per annum on the reducing balance basis. All depreciation is to be charged to cost of sales.
Note 3 On 1 October 20X8, Opal closed down its Merry Go Round division. The results of the division from 1 November 20X7 to the date of closure are included in the above trial balance figures. These results are as follows: $000 Revenue 9,800 Cost of sales 6,450 Distribution costs 2,040 Admin expenses 1,980 The net assets of the division were sold at a loss of $3.2 million and are currently included within cost of sales. The Merry Go Round division qualifies as a discontinued operation.
it’s difficult to copy and paste the whole question here and the SOCIE answer because it gets very messy after i post it. It’s okay, i’ll somehow try to figure the answer out. Thanks.
I can’t help you without that information! Maybe you could just tell me the narrative and the amounts shown in Retained Earnings column and Revaluation Reserve column?
SOCIE
This was given in the answer key.Share Retained Revaluation
Capital Earning Reserve TotalBal at 1 November 20X7 90000 100920 – 190920
Profit for year 9010 9010
Revaluation gain 3000 3000Bal at 31 October 20X8 90000 109930 3000
Given in the SOCIE
Retained earnings
-bal at 1 nov 20×7 100920
– profit for the year 9010
– revaluation gain 3000
– bal at 31 oct 20×8Revaluation reserve
-bal at 1 nov 20×7 –
-profit for the year –
– Revaluation gain –
-bal at 31 oct 20×8 3000It’s a misprint! The 3,000 in the retained earnings column shouldn’t be there. It needs to move across one column into revaluation reserve column
That way both the retained earnings column and the revaluation reserve column will both add up correctly to the stated totals of 109,930 and 3,000 respectively
OK now?
But the revaluation reserve column shouldnt add up to 3000 at the YE right. Because 200 of the Revaluation reserve will have to be transfered to the RE. Therefore the balance at YE will by right be, 3000-200 = 2800 right?
Like wise for the retained earning at ye, its supposed to be 100920+ 9010 + 200 tranfer from RE = right
I dn understand the part where they transfer the full rev.gain to the retained earnings. Usually its not like that.
“But the revaluation reserve column shouldnt add up to 3000 at the YE right. Because 200 of the Revaluation reserve will have to be transfered to the RE. Therefore the balance at YE will by right be, 3000-200 = 2800 right?”
That annual transfer is a “recommendation”
It’s not a mandatory requirement
If the directors had chosen to make this transfer then, yes, the balance would be 200 less and retained earnings would be 200 more
“I dn understand the part where they transfer the full rev.gain to the retained earnings. Usually its not like that.” – they HAVEN’T – that’s just a misprint
Hmm. Okay. Because what my lecturer told us was that as long as the PPE is revalued at the start of the year and there is a rev.gain , we need to automatically account for excess dep even if it doesnt say so in the qn.
So thats not true ? We only account for excess dep if the qn states so ?
“we need to automatically account for excess dep even if it doesnt say so in the qn.
So thats not true ? We only account for excess dep if the qn states so ?”
I cannot speak for what your lecturer believes but, so far as I am aware, the annual transfer is a recommendation and is not mandatory.
- You must be logged in to reply to this topic.