StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Financial accounting - Math Problem Example

Comments (0) Cite this document
Summary
I received your email only yesterday and I was happy to see your curiosity over these issues. In the first part of the email you asked me how to treat land and building which have a lower NRV than their book value. As accountants we follow accounting concepts…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.8% of users find it useful
Financial accounting
Read TextPreview

Extract of sample "Financial accounting"

Type here Your module here Your here Depreciation Charge = Depreciation of Building + Depreciation of Plant + Depreciation of Motor Vehicle
Depreciation of Building:
4 Million / 50 = $80000
Depreciation of Plant and Machinery:
1000000/10 = $100,000
100,000/10 = $10,000
$ 110,000
Depreciation of Motor Vehicle:
20,000 * 20% = $4000
(50,000-20,000)/ 8 = $3750
Total $7750
a)
I. Depreciation Charge for the year = 80,000 + 110,000 + 7750 = $197750
II. Depreciation for M.V will be charge for two years = 2 * 0.2 * 16000 = $6400
NBV of M.V sold = 16000 - 6400 = $9600
Loss on Disposal = 8000 - 9600 = ($1600)
III. Impairment Loss = 40,000 - 90,000 = ($50000)
IV. Grant = (0. 4 * 1000,000)/ 10 = $40,000
V. Surplus on Revaluation = 6 M - (4500,000 - 200,000 ) = $1.7 M
b) Notes complying with IAS 16 Requirements:
Land and Building
Cost of Land 1.5 Million
Cost of Building 3 Million
Total 4.5 Million
Depreciation (200,000)
Subtotal 4.3 Million
Surplus 1.7 Million
Revaluation Value 6 Million
Depreciation For the Year (80,000)
Balance Sheet Value 5920,000
Plant and Machinery
Historical Cost 1980,000
Accumulated Depreciation (436,000)
Subtotal 1544000
Depreciation for the year 110,000
Value at the end of the year 1434,000
c)
Hello Peter,
I received your email only yesterday and I was happy to see your curiosity over these issues. In the first part of the email you asked me how to treat land and building which have a lower NRV than their book value. As accountants we follow accounting concepts. According to accounting concepts, as long as business is going concern it should state all its assets on book value rather than on NRV. This means that since we have no intention of closing down, we are going to write it down at the book value, regardless of what our NRV is. You should not provide impairment losses in the financial statement as these will decrease our reported profit and may be misleading for tax authorities and shareholder. We have a responsibility of disclosing fair and accurate information, therefore we should not provide for impairment losses until we want to close our operations.
Our business investment buildings will be included at their fair value according to the judgment of auditors in the balance under long-term leases head. This will be done according to IAS 16 principles which calls for fair-value to be include in the balance sheet. Fair value consists of costs less depreciation less impairment losses. Since, we are not charging any depreciation, we can simply state these building at their NRV that according to you come around $2.5 Million.
You have also asked me about how to treat grants. You are right about the fact that we can treat it as deferred income. IAS 20 allows us to treat it as deferred income. However, this option may increase will increase our profit and will also result in more tax payments. So, it is better to not treat it as tax income and instead amortize it completely by adjusting it with the purchase of fixed assets.
References:
Harold Randall. (1995). Accounting. Lett's Educational
Robert Meigs and Hakka Bettner (1996) . Accounting: The Basis of Decision Making. McGraw-Hills Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Financial accounting Math Problem Example | Topics and Well Written Essays - 500 words”, n.d.)
Financial accounting Math Problem Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/miscellaneous/1506653-financial-accounting
(Financial Accounting Math Problem Example | Topics and Well Written Essays - 500 Words)
Financial Accounting Math Problem Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/miscellaneous/1506653-financial-accounting.
“Financial Accounting Math Problem Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1506653-financial-accounting.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Financial accounting

Financial accounting

...in the companies’ 2011 annual reports. This includes the ratio analysis and share price movements along with the FTSE 100 movements for the past four weeks. The second part includes the findings based on the financial analysis from the first part and the recommendations which follow from the findings as to which company has potential for better long-term investment. The third part of the project has the brief history of International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) and a list of transitional reliefs granted by the two boards for the retrospective application of a new revenue standard to ensure the comparability of...
16 Pages(4000 words)Essay

Financial accounting

...?Financial Accounting What is a manufacturing account?  Select one:  A) A manufacturing account shows the cost of goods sold in a manufacturing business.  B) A manufacturing account is an account that serves to calculate the cost of finished goods produced in a manufacturing business.  C) A manufacturing account is the personal account of a manufacturing business in the payables ledger.  D) A manufacturing account serves to calculate the direct manufacturing costs during the year, the amount of which is then transferred to the trading account.  Answer: Option B (A manufacturing account is an account that serves to calculate the cost of finished goods produced in a manufacturing business). Though option D is also the correct answer...
4 Pages(1000 words)Assignment

Financial Accounting

25,000 should be included in the revenue for the year ended 31 March 2013. ?50,000 for the paid goods by Witney limited should be included in the revenue for the year ended 31 March 2013. The amount of the sale of laptops that should be included in the revenue for the year ended 31 March 2013 is the full price for the contract with PC4U Ltd that is ?2,720,000. According to the IAS 18, the amount of servicing should affect the period in which the servicing takes place (Accaglobal.Com, 2013). To provide the true picture of the IBI Ryan Plc Company, adjustment of the amount included in the revenue and profit of the year ended 31 March 2013. The change will reflect a change in the overall profit and revenues for the year ended on 31 M...
3 Pages(750 words)Assignment

Financial accounting

... Task: Introduction This assignment presents the following issues: when to recognize revenues as d in the IAS 18; the application of the IAS 18 to the case of the IBI Ryan PLC; and a discussion of the meaning of creative accounting and earnings management, in relation to IBI Ryan’s case. Revenue recognition Revenue is “the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.” An income can be described as a gross inflow of financial benefits, less cost of sales or /and other expenditures such as operating costs and tax liabilities. In the context of a company...
5 Pages(1250 words)Assignment

Financial Accounting

... FINANCIAL ACCOUNTING TESCO TESCO is a well diversified company working in many different ventures; it has over the years created a great deal of value in the eyes of their customers. “Tesco operates 923 stores and employs 240,000 people, giving us access to a population of 260 million across our nine markets. Over the past five years, we have expanded from our traditional UK supermarket base into new countries, products and services, including a major non-food business, personal finance and internet shopping. The increasing scale and internationalization of our sales and purchasing operations makes a significant contribution to our efficiency and profitability, as we progress towards our long-term goal of becoming a truly international...
4 Pages(1000 words)Essay

Financial Accounting

... can be paid of whenever they are due. The profitability ratios are used to gauge the overall profitability of a company relative to its level of sales. The operating profit margin of the company registered an increase from 27.47% in 2010 to 31.98% in 2012. The operating profit increased on account of considerable decrease in the unusual expenses of the company. This shows that the overall operational efficiency of the company has not improved and the increase in operating margin is the result of a decrease in unusual expenses of the company. Profit margin of the company witnessed a considerable increase from 11.09% in 2010 to 18.22% in 2012. The increase in operating profits of the company translated into better net profit of the company...
4 Pages(1000 words)Assignment

Financial accounting

... of the firm and the extent to which such disclosures are regulated. However, it is evident that there are numerous drawbacks that come with having excessive guidelines; hence, they should be reduced to promote innovation, healthy competition, guarantee fiscal growth, and stability. Discussion Regulation is defined as a principle that governs a particular practice or behaviour. Various firms such as Enron have gone bankrupt and have reported failures in accounting because of unethical practices. As a result, most nations have focused on heavily regulating the financial reports and accounts to avoid failures such as those that happened in renowned firms like Lehman Brothers and Parmalat among others. Although regulation of financial reports...
7 Pages(1750 words)Essay

International Accounting

The Profit and Loss for 2006 of PSA Peugeot Citroen is presented Vertically as depicted in its annual report. Further, there are ‘Functional breakdown’ of expenses, as the headings of expense accounts are as per functions performed, e.g., Cost of Goods and Service sold, Selling, General, and Administrative Expenses, Research and Development Costs, and like that.

Legal Reserve is the reserve as required by any national law of the country of the European Union. This is depicted in the subhead of ‘Retained Earnings’ under ‘Equity’ of PSA Peugeot Citroen's Balance Sheet in accordance with Article 9 of the Fourth Schedule.

“Legal reserves are a mechanism whereby management...
10 Pages(2500 words)Case Study

Accounting & Financial Management

AWB’s operations can be categorized into areas ranging from ‘pool management services’ to ‘harvest financing’, and ‘International commodity management’. Only a company with such a big range of activities and financial outlays can become the benchmark for an equally big company like ‘Woolworth Limited’.

The performance of an entity can be better analyzed through its profitability analyses. The profitability ratios like Gross Profit ratio, Net Profit Margins, Return on assets (ROA), and Return on Equity (ROE). The calculations of such ratios are shown in the attached annexure. The Gross Profit ratio measures the percentage of each pound or dollar of sales remaining aft...
10 Pages(2500 words)Assignment

Financial Management Analysis of Rio Tinto Plc

Taking into consideration that Harmony is the sixth-largest in the world in the gold mining industry, the choice of Harmony God Mining Co. as a benchmark company is the most suitable and justifiable. Moreover, Harmony has also some investment stake in Rio Tinto, and this situation makes the company more suitable for the choice. At places, the benchmark company’s performances have been better than Rio Tinto, and thus Harmony has a competitive edge as well over Rio Tinto.

Profitability ratios like Operating Margin Ratio, Net Margin Ratio, Return on Assets (ROA), and Return on Equity (ROE) are the performance analyzer of any company. Profit Margin ratios show the relationship between profit and sales. Since profit ca...
8 Pages(2000 words)Case Study

Accounting for Leases

The classification needs to be made at the inception of the lease itself. Risk, with respect to leasing, refers to the possibility of loss arising on account of under-utilization or technological obsolescence of the asset. Reward means the incremental net cash flows that are generated from the usage of the asset over its economic life and the realization of the anticipated residual value on expiry of the economic life. A lease which cannot be classified as a finance lease is known as an operating lease. In the following situations a lease is classified as Finance lease:
The lower of the present value of minimum lease payments and the fair value of the asset is recognized as an asset and liability. The minimum lease payments a...
6 Pages(1500 words)Assignment

Emergency Economic Stabilization Act of 2008 and How It Has Impacted the Financial Markets

Though there were objections from various quarters about the huge amounts of tax payer’s money being used in the bailout of huge corporates, the Act has been successful in moving the downturn towards a flat point and now has started slowly moving towards a recovery stage. The various programs under the EESA 2008 have played a significant role in the financial sector, housing mortgage, and banking institutions to save the institutions from complete disaster.

The Emergency Economic Stabilization Act is a huge taxpayer bailout designed to rescue the financial sector. The amount of money to be used is around $700 billion or $2000 per American citizen (Public mark up). Emergency Economic Stabilization Act of 2008 is al...
10 Pages(2500 words)Research Paper

The Effects of Financial Crisis on Supplier Selection Criteria of the Oil and Gas Industry Equipment Market

It is a difficult task to find those vendors who not only have the adequate quality and quantity of the needed raw materials but who also have an attitude of efficiency and display commitment to customer service (Sonmat, 2006). Further, organizations also strive to locate and select vendors who can be depended upon for long term relationship.

The number of factors or attributes desired from the vendor is vast, and different organizations and different industries place different importance on the attributes (Sonmat, 2006). Some of the vendor attributes may gain importance owing to the nature of the industry, for example, in the case of consumer perishables suppliers, like fresh vegetables or fruits, the buying firm would...
20 Pages(5000 words)Literature review

Accounting systems and Assurance

The allocation of resources is dependent on the information regarding the financial condition of the firm. Here comes the role of accounting, which provides all the required financial information to the investors through several financial reports. There There are two classifications of accounting 1) financial accounting and 2) management accounting. Financial accounting is the one which furnishes all the financial information to the investors and management accounting is used at the micro-level where the internal allocation of the funds takes place. Accounting is one of the most crucial components of any organization as it provides all those financial information that is used to make the economic and financing decision making.&nbs...
9 Pages(2250 words)Coursework

Evaluation of Performance of a Bank Using Published Accounting Data

...Table of Content Introduction: 2 Background 3 Thesis ment 4 Main Body 4 Conclusion 6 Limitations 7 Recommendations 7 Bibliography 8 Evaluation of Performance of a Bank Using Published Accounting Data Introduction: Banks are the global industrial powerhouses1 and they have introduced very complex and risky products and services. During its operation, every bank is exposed to credit risk, liquidity problems, interest risk, market risk, operational and management risk.2 The collapse of banking industry severely influences the world financial system, which means that it is very important to evaluate the performance of the banks. There are different parameters based on which performance of a bank can be evaluated such as financial management...
7 Pages(1750 words)Case Study

Progress on G20 Summit on Accounting Standards

The said declaration contains the results of the discussions of the G20 leaders related to the current financial crisis. It contains what the G20 believes are the causes of the financial crisis and the actions to be taken.

The said declaration contained the short-term (classified as immediate actions) and medium-term actions that the G20 members think should be done to achieve true financial reforms. As part of the medium-term actions, the declaration states that “the key global accounting standard bodies should work intensively toward the objective of creating a single set of high-quality global standard”. It also stated that “regulators, supervisors, and accounting standard setters, as appropriate, s...
9 Pages(2250 words)Lab Report

Alternative Methods of Accounting

Accounting has always been a self-regulated profession. After the 2nd half of the 20th-century changes in accounting occurred due to the influence of private organizations such as the FASB.  In the United States, accountants followed the generally accepted accounting principles (GAAP) to guide their everyday work. Accounting is a discipline that is very strict in its ways and does not welcome change well. In the aftermath of the Enron and WorldCom scandal, the government had to force change with the creation of the Sarbanes Oxley Act of 2002 due to a lack of trust in financial information. 

The efficient market hypothesis states that securities are typically in equilibrium and that they are fairly priced in th...
8 Pages(2000 words)Article
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Math Problem on topic Financial accounting for FREE!

Contact Us