- This topic has 9 replies, 4 voices, and was last updated 11 years ago by
.
- Posts
i can’t understand what is the standadrd for reporting of such contract. the whole value was taken from the sales. the cost was taken out from the CoS- where has gone the 20% mark-up – wasn’t this a revenue for Winger?
after that the cost of this goods was added to the inventories and the receivables were decresed with the whole value – i just can’t undestand the logic. could you please explain it to me.Hi. You need to cancel the recorded “sale” so Dr revenue and Cr receivables at sale price.
Now we need to bring these goods back into Closing inventory so…..
Dr inventory on the SoFP and Cr cost of sales
For the profit on property sale(note c) in the Winger question, anyone can explain for me what it is? I dont understand the answer why do they make the total profit 45,000 into 30,000 to retain earning(Balance sheet) and 15,000 to profit on the sale (in the Financial Statement position)?
At final sentence they say:” It’s had not been depreciated on the basis that depreciation charge would not be material”. I dont understand the implication of this information. Anything relates to depreciation of this asset need to be adjusted???
Pls help!
I don’t understand your question! What does “why do they make the total profit 45,000 into 30,000 to retain earning(Balance sheet) and 15,000 to profit on the sale (in the Financial Statement position?” mean? For one thing, what is the “Financial Statement position”?
The implication about the sentence concerning depreciation is that the asset SHOULD HAVE been depreciated
Thank u Mike for the reply and Im so sorry for my misleading question that makes u confuse. Here is the note:
Note (C) in question Winger @ BPP F7 textbook pages 377
On April 20×0 Winger acquired a new property at a cost of $200 Mil. For the purpose of calculating depreciation only, the asset has been separated into the following elements.
Separate asset
Cost Life
Land 50,000 freehhold
Heating sys 20,000 10 yrs
Lifts 30,000 15 yrs
Building 100,000 50 yrsThe depreciation of the elements of the property should be calculated on a straight-line basis. The new property replaced an existing one that was sold on the same date for $95 mil. It has cost $50 mil and had a carrying value of $80 mil at the date of sale. The profit on this property has calculated on the original cost. It had not been depreciated on the basis that depreciation charge would not be material.
Plant and machinery is depreciated at 20% on the reducing balance basis.
My problems are :
1. I don’t understand how to deal with note C in order to prepare Income statement and Balance sheet. Profit on disposal non-current asset is : 95mil – 50mil = 45 mil and this is figure that they provide on the trial balance.As I see in the answer, for the figure of Income statement: Profit on disposal of land and buildings (95 mil – 80 mil = 15mil)- OK I get this; Profit on disposal in Retain Earnings for Balance Sheet:(45 mil – 15 mil = 30 mil) – I don’t understand this: why they put the profit to Retain Earnings?
I really dont know how to solve this note for purpose of preparing Balance sheet and Income statement.
Thank u for explain and pls be patient with me!
Hi, that’s better!
The 80 carrying value is compared with the original cost of 50 That figure of 30 (the difference between the two) must be in the Revaluation Reserve and is now being released from Revaluation into Retained Earnings.
The difference between sale price of 95 and Revalued amount / carrying value is a profit on the disposal and is shown in the Income Statement.
So, 15 goes to Income Statement and 30 is transferred through the Statement of Changes in Equity to the Retained Earnings from the Revaluation Reserve
Better?
- You must be logged in to reply to this topic.