Semester 1 Week 11 PP (Recap session)

Question 1

What is the order you write the SOFP?

Answer 1

Remember the order:
Non-current assets
Current assets
Total assets
Equity
Non current liabilities
Current liabilities
Total equity and liabilities

Question 2

How do we get retained earnings?

Answer 2

Retained earnings = opening retained earnings + profit – dividend

Question 3

What do accrued income and deferred income go in the SOFP?

Answer 3

accrued income = asset, deferred income = liability

Question 4

How do you calculate revaluation?

Answer 4

Work out the NBV of the asset (if not given)
Work out the gain as fair (market) value less NBV – this goes to the revaluation reserve.
Wipe out accumulated depreciation.
Increase the cost of asset to market value.

Question 5

Revaluation example:
Clara Limited have a building with a cost of £600,000 and accumulated depreciation of £75,000.
At the year end the directors wish to value it to its fair value of £700,000.
Showing workings prepare the journals to account for this.

Answer 5

NBV = £600,000 – 75,000 = £525,000
Gain = £700,000 - £525,000 = £175,000
Increase in cost = £700,000 - £600,000 = £100,000
Dr building cost 100,000
Dr building accumulated depreciation 75,000
Cr revaluation reserve 175,000
Being revaluation of building

Question 6

What does an amortisation journal look like?

Answer 6

Dr revaluation reserve
Cr retained earnings
Being amortisation of revaluation reserve

Question 7

How do we treat held for sale assets?

Answer 7

Recognise at lower of current value and NRV (fair value less costs to sell).
Remove from non-current assets and hold in separate category.
If NRV is the lower – difference goes as a loss through P&L.
Do not depreciate while held for sale assets.

Question 8

What is the journal for an individual asset impairment?

Answer 8

Dr P/L impairment
Cr accumulated depreciation