A few questions....

[Random_Guy]

1. When you are asked to record the disposal of a non-current asset, and the Accumulated Depreciation for the asset has not been updated for the current reporting period, do you need to record a separate General Journal entry to debit Depreciation of Asset and credit Accumulated Depreciation of Asset? Or do you just calculate the depreciation of asset for the period, then just add the figure onto the Accumulated Depreciation figure given and record the normal required entries for a disposal of asset, with the updated figure to debit Accumulated Depreciation of Asset and credit Disposal of Asset?

2. Use the following information given to calculate receipts from debtors:
Debtors at Jan 1 were $22,000. Credit Sales during the period were $280,000. It is expected that 92% of debtors will pay their account. Discount expense is expected to be 2% of credit sales.

I'm not sure whether the "92% of debtors paying their account" includes discount expense or not. So tell me whether you get Receipts from Debtors as being $272,240 or $277,840.

3. Explain why Net Cash from Operating Activities may be a better indicator of profit than the Budgeted Cash Flow Statement.

Thanks!!!

[BoredSatan]

1. When you are asked to record the disposal of a non-current asset, and the Accumulated Depreciation for the asset has not been updated for the current reporting period, do you need to record a separate General Journal entry to debit Depreciation of Asset and credit Accumulated Depreciation of Asset? Or do you just calculate the depreciation of asset for the period, then just add the figure onto the Accumulated Depreciation figure given and record the normal required entries for a disposal of asset, with the updated figure to debit Accumulated Depreciation of Asset and credit Disposal of Asset?

2. Use the following information given to calculate receipts from debtors:
Debtors at Jan 1 were $22,000. Credit Sales during the period were $280,000. It is expected that 92% of debtors will pay their account. Discount expense is expected to be 2% of credit sales.

I'm not sure whether the "92% of debtors paying their account" includes discount expense or not. So tell me whether you get Receipts from Debtors as being $272,240 or $277,840.

3. Explain why Net Cash from Operating Activities may be a better indicator of profit than the Budgeted Cash Flow Statement.

Thanks!!!

1. no you must FIRST calculate the extra depreciation and record that
THEN you do your disposal.

2. the 92% is off the credit sales+debtors balance and the 8% would be bad debt

3. thats just a stupid question.. operating activities deals with day to day activities which of course is more relevant to profit than the WHOLE business' cash flow

[Random_Guy]

Can you please calculate Receipts from Debtors from question 2 please? Thanks.

[BoredSatan]

i get 272240

[Random_Guy]

Cheers. That's what I got as well.

[Delca]

1. no you must FIRST calculate the extra depreciation and record that
THEN you do your disposal.

Depends on what the question asks, however I don't think they would penalize you for recording the update in depreciation if not asked

2. the 92% is off the credit sales+debtors balance and the 8% would be bad debt

While the answer is still correct, the question never mentioned anything about bad debts, it's probably Balance to be carried forward


3. Is a half stupid question - being that the figure you estimate for profit will not take into account many other non cash related factors such as depreciation and stock loss, however to get the marks you'd probably need to mention that the whole budgeted cash flow statement includes cash from financial and investing activities which have no relevance to profit and loss.

[BoredSatan]

Depends on what the question asks, however I don't think they would penalize you for recording the update in depreciation if not asked

I think you will LOSE marks for not updating the depreciation because then your accumulated depreciation when disposing would be wrong. and because you havent recorded the extra depreciation, you cant just randomly add depreciation to the accumulated account

While the answer is still correct, the question never mentioned anything about bad debts, it's probably Balance to be carried forward

It says '92% of debtors will pay their account'. it DOES NOT SAY '92% of debtors will pay their accounting in the current period'
I'm almost 100% sure that will be a bad debt.

[Ashchaos]

2. the 92% is off the credit sales+debtors balance and the 8% would be bad debt

I see the 92% being only for the credit Sales during the period and doesn't include the balance from the previous period. Since the budgeted report is only for this reporting period, it doesn't seem right to include the previous reporting period as the percentage of debtors paying back might have been different...

[24309]

just another question......how does NRV affect cogs?
Is it right to say that if it's lower of NRV and Cost price, then it would cause a decrease in cost of sales due to a lower cost price?

and also stock write down comes after cogs doesnt it, under adjusted gross profit?

[Ashchaos]

just another question......how does NRV affect cogs?
Is it right to say that if it's lower of NRV and Cost price, then it would cause a decrease in cost of sales due to a lower cost price?

yeah pretty much what you said there. if the NRV is lower than cost price -> causes stock write down -> lower cost price -> lower cost of sales expense when the stock is sold

and also stock write down comes after cogs doesnt it, under adjusted gross profit?

yup it does. stock write down and stock loss/gain are the only ones under adjusted gross profit.

[24309]

Thanks....couple more quesitons lol

1. When defining efficency, you mention the firm's ability of managing debtors, stock and creditors. Is it also right to go on and say how efficiently business has used assets to earn and generate revenue?

2. When defining prepaid sales revenue as a CL.....you say how it's yet to be earned and its an obligation they use within 12 months. Is it also correct to definie it as a present obligation that will result in an outflow of economic resources within 12 months?

Thanks

[soopertaco]

how did you get the receipts from debtors?

[soldier_on16]

Wouldn't rec from debtors just be 92% X (280000 + 22000)??

[soopertaco]

Wouldn't rec from debtors just be 92% X (280000 + 22000)??

no but then of that 92%, 2% will receive discounts so the business will actually receive less.

what i'm not getting is that i'm doing:
((22000+280000)*0.92)*0.02=5556.8

((22000+280000)*0.92) - 5556.8=272283.2? im confused

[soldier_on16]

(0.92 * (280 000 + 22 000)) - (0.92 * 0.02 * (280 000 + 22 000)) = 272 283.2 got it