Saturday, November 2, 2019

FINANCIAL ACCOUNTING Essay Example | Topics and Well Written Essays - 1500 words

FINANCIAL ACCOUNTING - Essay Example 180,000/5=?36,000. Motor Vehicles: The depreciation charge for the new vehicle purchased would be ?25,000 x 40% = ?10,000. The remainder of the vehicles that need to be depreciated for the current year cost ?980,000 less the car disposed of ?20,000 = ?960,000. From the total accumulated depreciation figure of ?500,000, ?8,000 is attributable to the vehicle disposed of. As such, accumulated depreciation attributable to the vehicles to be depreciated for the current year amounts to ?492,000, giving a net book value of ?468,000. As such, the depreciation charge for the year for these vehicles is 40% of ?468,000 amounting to ?187,200. Total depreciation charge for the year is the sum of the emboldened figures = ?453,200. (a) (ii) Profit / Loss of Disposal The motor vehicle disposed of cost ?20,000 and the accumulated depreciation in respect of such vehicle was ?8,000 (?20,000x40%). As such the balance on the vehicle was ?12,000. The company was only able to obtain ?8,000 from the sale an d as such made a loss of ?4,000 (12-8). (a)(iii) Impairment Loss for the year As at the date of the impairment review, the item 2 of plant and machinery had a carrying value of ?180,000 less the ?36,000 depreciation charge = ?144,000. The recoverable amount has been ascertained as ?50,000. As per IAS 36, the asset must be written down to the lower of carrying value or recoverable amount. As such, there is an impairment loss of ?94,000 (144-50). (a)(iv) Release of the grant for the year In accordance with IAS 20, the grant has been treated as deferred income and released over the lifetime of the asset. As such, the release for the year would be ?400,000/5=?80,000. (b) Notes to the Balance Sheet as at 30th September 2010: Property Plant and Equipment Land & Buildings Plant & Machinery Motor Vehicles Total COST as at 1 Oct 2009 3,000,000 980,000 980,000 4,960,000 Additions 25,000 25,000 Disposals (20,000) (20,000) Revaluations 2,000,000 2,000,000 as at 30 Sept 2010 5,000,000 980,000 98 5,000 6,965,000 ACCUMULATED DEPRECIATION as at 1 Oct 2009 500,000 436,000 500,000 1,436,000 Depreciation on Disposals (8,000) (8,000) Depreciation written off for revaluation (500,000) (500,000) depreciation charge for the year 60,000 196,000 197,200 453,200 as at 30 Sept 2010 60,000 632,000 689,200 1,381,200 Impairment of assets (94,000) NET BOOK VALUE as at 30 Sept 2010 4,940,000 254,000 295,800 5,583,800 (c) MEMO To: Peter Williams, Marketing Director From: John Doe, Financial Accountant Date: 15th April 2011 Subject: Queries on the Financial Statements for the year ended 30.9.10 I am writing to you in response to the various queries you made known to me in relation to the aforesaid Financial Statements of Green PLC. Revaluation Surplus The land and buildings were revalued by ?2 Million in the aforesaid Financial Statements so that the resulting value of the asset at the end of the said period was ?5 Million. This is permitted under IAS 16 Property Plant and Equipment, which prov ides that assets can be valued using the Revaluation Model, under which the asset will be recognised at its fair value as opposed to the cost of the asset. The accounting entry in the case of an upward revaluation is to increase the asset value to the revalued amount and to create or increase the Revaluation Reserve by the amount revalued (i.e. the difference between the carrying amount of the

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