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Dear Sir.
I have doubts over net realisable value of disposal assets. Please enlightened me.As at 31 12.2013
Historic Cost of assets $210,000
Market value $150,000
Impairment made as at 31 12.2013 $60,000At 30th June 2014
Market value $100,000
Selling price $70,000 in July 2014Dr.P/L On sale 210,000
Cr Impairment. ? Which amount?
Which FRS to adopt?Thanks
I think by “impairment” you really mean depreciation. Am I correct?
I think by “Dr P/L” you mean “Disposal Account”. How am I doing?
Ok, the asset has an original cost of $210,000 and you have depreciated it as at December 2013 by $60,000
By June 2014, the date of sale, the asset value is “market?” value of $100,000 (do you mean carrying value?)
Whatever, the value has fallen since the previous December from $150,000 to $100,000. If depreciation is not being accounted for on a monthly basis, the selling price will be compared with the figure of $150,000 as at previous December and will result in a loss on disposal being recorded amounting to $150,000 carrying value less $70,000 sale proceeds = $80,000
If depreciation IS being accounted for on a monthly basis, then you will need to calculate the depreciation expense for the 6 months to June 2014, deduct that expense from $150,000 and compare the net figure with the $70,000 sale proceeds
The net expense of depreciation + loss on disposal will equal $80,000
Ok?
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