|
163
ANSWER
ROGER JONES
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MAY 20X1
$
$
Revenue
402,200
Cost of sales
Opening inventory
50,000
Purchases
250,000
Purchases returns
(15,000)
285,000
Closing inventory
42,000
243,000
Gross profit
159,200
Expenses
Wages and salaries
58,800
Selling expenses
22,600
Loan interest
5,100
Depreciation (W1)
12,300
Other operating expenses
17,700
116,500
Profit for the year
42,700
ROGER JONES
STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 20X1
$
$
Assets
Non-current assets
Property: cost
120,000
accumulated
depreciation
(W1)
21,800
98,200
Equipment: cost
80,000
accumulated
depreciation
(W1)
48,500
31,500
Current assets
Inventory
42,000
Trade accounts receivable
38,000
Bank
1,300
Cash in hand
300
81,600
Total assets
211,300
Capital and liabilities
Capital
Balance at 1 June 20X0
126,600
Profit for the year
42,700
Drawings
(24,000)
Balance at 31 May 20X1
145,300
Non-current liabilities
17% loan
30,000
Current liabilities
Trade accounts payable
36,000
Total capital and liabilities
211,300
BPP Tutor Toolkit Copy
PART D: RECORDING TRANSACTIONS AND EVENTS
164
Working
1
Depreciation
Property
$
Opening balance
20,000
Charge for the year (1.5% × 120,000)
1,800
Closing balance
21,800
Equipment
Opening balance
38,000
Charge for the year (25% × (80,000 – 38,000))
10,500
Closing balance
48,500
Depreciation charge in statement of profit or loss (1,800 + 10,500)
12,300
EXAM FOCUS POINT
There are a number of articles on property, plant and equipment in the Financial Reporting (FR) exam
resources section of the ACCA website. Although these articles were written for FR, they are also
relevant to FFA/FA and you should read them.
BPP Tutor Toolkit Copy
CHAPTER 8
//
TANGIBLE NON-CURRENT ASSETS
165
Non-current assets are assets which are bought by the business for continuing use. Tangible non-
current assets are those with physical form.
Capital expenditure is expenditure which forms part of the cost of non-current assets. Revenue
expenditure is expenditure incurred for the purpose of the trade or to maintain non-current assets.
The accounting treatment of tangible non-current assets is covered by IAS 16 Property, plant and
equipment.
The cost of a non-current asset, less its estimated residual value, is allocated fairly between accounting
periods by means of depreciation. Depreciation is both of the following.
–
Charged against profit
–
Deducted from the value of the non-current asset in the statement of financial position
Two methods of depreciation are specified in your syllabus.
–
The straight line method
–
The reducing balance method
IAS 16 allows entities to revalue non-current assets to fair value.
When a non-current asset is revalued, depreciation is charged on the revalued amount.
When a non-current asset is sold, there is likely to be a profit or loss on disposal. This is the difference
between the net sale price of the asset and its carrying amount at the time of disposal.
IAS 16 requires a reconciliation of the opening and closing carrying amounts of non-current assets to be
given in the financial statements.
An asset register is used to record all non-current assets and is an internal check on the accuracy of the
nominal ledger.
CHAPTER ROUNDUP
BPP Tutor Toolkit Copy
PART D: RECORDING TRANSACTIONS AND EVENTS
166
1
Which of the following statements regarding non-current asset accounting is correct?
A
All non-current assets should be revalued each year.
B
Non-current assets may be revalued at the discretion of management. Once revaluation has
occurred it must be repeated regularly for all non-current assets in a class.
C
Management can choose which non-current assets in a class of non-current assets should be revalued.
D
Non-current assets should only be revalued to reflect rising prices.
2
Which of the following statements regarding depreciation is correct?
A
All non-current assets must be depreciated.
B
Straight line depreciation is usually the most appropriate method of depreciation.
C
A change in the chosen depreciation method is accounted for retrospectively, with all previous
depreciation charges reversed and recalculated.
D
Straight line depreciation is calculated on cost less residual value (if any).
3
What is an asset's carrying amount?
A
Its cost less annual depreciation
B
Its cost less accumulated depreciation
C
Its net realisable value
D
Its replacement value
4
Give two common depreciation methods.
5
A non-current asset (cost $10,000, depreciation $7,500) is given in part exchange for a new asset
costing $20,500. The agreed trade-in value was $3,500. Which of the following will the statement of
profit or loss include?
A
A loss on disposal $1,000
B
A profit on disposal $1,000
C
A loss on purchase of a new asset $3,500
D
A profit on disposal $3,500
6
What details about a non-current asset might be included in an asset register?
7
Why might the asset register not reconcile with the non-current assets?
A
Asset stolen or damaged
B
New asset, not yet recorded in the register
C
Errors in the register
D
All of the above
QUICK QUIZ
BPP Tutor Toolkit Copy
CHAPTER 8
//
TANGIBLE NON-CURRENT ASSETS
167
1 B Correct
A
Non-current assets may be revalued, there is no requirement to do so in IAS 16
C
Incorrect, all non-current assets in a class must be revalued
D
Incorrect, non-current assets may be reduced in value as well as being increased
2
D Correct
A
Incorrect, some non-current assets are not depreciated eg land
B
Incorrect, management should choose the most appropriate method
C
Incorrect, a method change should be accounted for prospectively, not retrospectively, previous
depreciation charges are not recalculated
3
B
Its cost less accumulated depreciation
4
Straight line and reducing balance
5 B
$
Carrying amount at disposal (10,000 – 7,500)
2,500
Trade-in
allowance
3,500
Profit
1,000
6
Date of purchase
Description
Original
cost
Depreciation rate and method
Accumulated depreciation to date
Date and amount of any revaluation
7
D
Other reasons include an asset that is obsolete and so scrapped or improvements not yet
recorded in the register.
Now try ...
Attempt the questions below from the Practice Question Bank
Qs 34 – 39
ANSWERS TO QUICK QUIZ
BPP Tutor Toolkit Copy
Do'stlaringiz bilan baham: | 
