hello everyone! September 2007 question 20 Why not deduct the inventory (closing stock) in the pnl in the cost of sales? Thank you!
This figure is already included in the "cost of goods". The inventories item needs to appear on the SoFP (as we are only allowed to sue it once)
Thank you very much April 2010 in the balance sheet why the accrual interest in the current liabilities is 80? And not 8% * 4 millions? Thank you again
The borrowing is taking place in October and interest is not payable until the next financial year, so we need to accrue 1/4 of the annual interest cost.
Hello everyone. Today's questions are related to depreciation & revaluation reserve. September 2016 Q20 The depreciation is based on the historical cost (0,02*4320=86.4) Everything is fine till the point that this amount (86.4) is added to the revaluation reserve. From the core reading, it is known that the only depreciation that we add in the revaluation reserve is the accumulated one that we are given in the trial balance. Could you explain why is this (86.4) added to the reval reserve? Is this because the question mentions that the gains are recognized? In general, does it matter if the gains are recognized? And if yes could you tell me the changes or amendments that i have to be aware of? Also, the value of the factory in the BS is 6000 with 0 depreciation. Is it right? April 2009 Q19 This type of question was similar to the one of September 2016 with the only difference that it was mentioned that the revaluation was not incorporated in the bookkeeping systems. In this case, the depreciation is based on the new cost (0,02*700=14) and it is deducted from the value of the asset in the BS (i.e 700-14=686) in contrast with the September's 2016 which was 0 depreciated in the BS. Also, the revaluation reserve is calculated deducting only the accumulated depreciation and not 14 that was calculated above. Therefore, 1. What is the impact/change if the gain on revaluation is recognized? 2. Is the case different if the depreciation is based on the new or historical cost? I mean does this affect the value of the revalued assets in the B/S? (deducting/no deducting of depreciation) THANKS IN ADVANCE!!
Hi The crucial difference between the two questions is the timing of the revaluation. In September 2016 Q20, the question tells us the revaluation is just before the end of the year. As a result, the depreciation is done first with the figures reflect the the starting balance figures, and then the revaluation is done afterwards (and so reflects the year's depreciation). In April 2009 Q19, the question tells us the revaluation was at the start of the year. As a result, the revaluation is done first, and then the depreciation for the year is done afterwards (reflecting the revalued value of the asset). Hope this helps Lynn
