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Statement of cash flow statement

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Statement of cash flow statement

  • This topic has 1 reply, 2 voices, and was last updated 10 months ago by John Moffat.
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  • August 14, 2024 at 12:59 pm #709667
    MoeThetHmu
    Participant
    • Topics: 1
    • Replies: 0
    • ☆

    At financial position, the b/d are c/d of revaluation surplus are $91,000 and $100,000. This shows the increase in revaluation surplus account.
    There was also disposal of fixtures and fittings with an original cost of $85,000 and a carrying amount of $45,000, sold for $32,000 during the year.

    The opening and closing balances of PPE are $595,000 and $720,000 respectively.

    In working to find the purchase amount in the PPE account, this revaluation increase 9 should be accounted in debit side of PPE account whereas the credit entry would be recorded in the revaluation reserve account. The original cost of disposal would be recorded credited in the PPE account and debited in disposal account.

    The opening and closing balances of accumulated depreciation are 290,000 and 340,000 respectively.
    In order to find this year’s depreciation, the accumulated depreciation of the disposed fixtures and fittings would be calculated first where cost less depreciation ($85,000-$45,000) is $40,000. Then from the working accumulated depreciation account, the depreciation of $90,000 is calculated.

    What I don’t understand in this working of accumulated depreciation account is, are we not supposed to remove accumulated depreciation of the revalued PPE just like we have removed the accumulated depreciation of the disposed fixture and fitting in the accumulated depreciation account?

    August 15, 2024 at 9:05 am #709717
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    We do not need to deal with the cost account and the accumulated depreciation account separately (and we cannot do anyway because we do not know the accumulated depreciation on the revalued asset).

    We just need to do the workings based on the carrying values.
    We know the carrying value at the start of the year and at the end of the year.
    During the year it will increase by the revaluation surplus of 9,000 and will reduce by the loss on disposal of 8,000.
    The missing figure must then be the depreciation charge for the year.

    Have you watched my free lecture on Statements of Cash Flows, because it does cover this? (The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well 🙂 )

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