- November 12, 2015 at 2:34 pm #281970
NCA 2001 2002
PPE 1023 600
EQUITY & LIABILITY
ordinary shares $0.20 each 29 24
share premium 447 377
1.depreciation on TNCA $22 million
2.during the year plant and machinery costing 1464 million and a carrying value of $244 million was sold for $250 million
3.during the year 25 million shares were issued at market value
sir i need to clear myself about two things
do we need to remove the carrying value i-e 244 to find additions in ppe account ?
why we can’t remove it on cost i-e 1464
plz can you show me how to do that treatment for share capital+share premiumNovember 12, 2015 at 2:43 pm #281974
“do we need to remove the carrying value i-e 244 to find additions in ppe account ?
why we can’t remove it on cost i-e 1464” – because it’s in the ppe at carrying value so we have to take it out at carrying value
There’s an example of this in the free course notes – have you worked through them as you watched the lectures?
25 million shares with a nominal value of 20 cents each were issued – so that accounts for the movement in the share capital account of $5m
But they must have been issued at a premium and that will account for the increase in the share premium account from 377 to 447. So total receipts from the share issue must have been $5m share capital + $70m share premiumNovember 13, 2015 at 2:51 am #282065
about first point:yes i have done the examples which were given in notes but i confused myself with asset register because asset is removed from there always at cost.
second:clear and understood. i was confused with the 25 million figure
thanks sirNovember 13, 2015 at 3:07 am #282066
sir another problem facing in cash flows question
nca *000 *000
at cost 93500 80000
acc dep (43000) (48000)
revaluation.r 7500 2500
during the year the company redesigned its display areas in all of its outlets.the previous displays had cost 10 m and had been written down by 9 million.there was an unexpected cost of 500,000 for removal and disposal of old display areas.also during the year the company revalued the carrying amount of its property upwards by $5 million,the accumulated depreciation on these properties of 2 million was reset to zero.
sir i found it difficult to solve
profit/loss on sale
purchase of ncaNovember 13, 2015 at 8:02 am #282086
Is depreciation $6m, loss on disposal $1.5m, purchase of TNCA $20.5m, proceeds of disposal $(.5m)?November 13, 2015 at 9:01 am #282109
i have problem in understanding these workings or i am not getting that paragraph
like display has 10 million cost and written down by 9 million.it means its is depreciated by 9 million?
also during the year the company revalued the carrying amount of its property upwards by $5 million,the accumulated depreciation on these properties of 2 million was reset to zero.
it means we need to debit the 2 million in accumulated depreciation and credit depreciation account?
i have watched the answer of this question in kit but i am not getting it how its done.November 13, 2015 at 11:34 am #282129
It may be easier to do it in two T accounts, the first for the Asset and the second for Accumulated Depreciation
Brought forward $80
Revaluation $3 (Yes, $3. The other $2 will be debited to Accumulated Depreciation)
Carried forward $93.5
So $20.5 must have been purchases of Asset
On Disposal $9
Carried forward $43
Brought forward $48
So $6 must have been depreciation for the year
OK now?November 13, 2015 at 1:18 pm #282145
sir almost clear.just one thing i am thinking about the revaluation i-e 5000
the 2000 figure comes because of it useful life was revised and the 3000 comes of increase in asset value?November 13, 2015 at 3:32 pm #282180
No, it was revalued by $5,000 and the $2,000 depreciation was eliminated in the process of that revaluation
Say you have an asset cost $20,000 with accumulated depreciation of $3,000 (so a carrying value of $17,000) and you wish to revalue by $5,000
Can you agree that the carrying value at the end should be $22,000?
Now we can get there in either of 2 ways:
We can Dr Asset $5,000 Cr Revaluation Reserve $5,000 – effective, but not nice
Why not instead Dr Asset $2,000, Dr Accumulated Depreciation $3,000, Cr Revaluation Reserve $5,000
Now we have the Asset account at $22,000 and Accumulated Depreciation at $NIL – much nicer
OK?November 14, 2015 at 11:27 am #282295
yes,i understood just the presentation is different.
what if i follow the first method debit asset and credit accumulated depreciation
in first method the accumulated depreciation account will remain 3000 and if i follow second method then accumulated account becomes zero
in previous question what will it effect if i followed the first methodNovember 14, 2015 at 3:28 pm #282343
“what if i follow the first method debit asset and credit accumulated depreciation” – please, don’t do this! This makes no sense at all
In the original post there is the line “the accumulated depreciation on these properties of 2 million was reset to zero.” So you can’t do the first method!
If that line were not there, then the first method would involve the journal entry:
Dr Asset $5m
Cr Revaluation Reserve $5mNovember 16, 2015 at 7:23 am #282741
okay .i understood that very well.thanksNovember 16, 2015 at 8:07 am #282755
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