cambridge ex.15 question

[suzuna]

"explain how the value of the trade-in should be reported in the profit and loss statement" (cambridge, ex. 15.8c.)

so in the 'disposal of asset' account, there's CR 'loss on disposal of the asset' $400. would that mean the trade-in value is reported in the profit and loss statement under 'other expenses' as 'loss of disposal of the asset' $400? or would it be classified under 'other revenue' because it reduces the liability owed to the sundry creditor?

and also in general with all trade-in's is it expected you'd get a loss on disposal of the asset? coz there's no way the creditor would pay more than the carrying value... or maybe not?

thanks in advance guys!

[eeps]

"explain how the value of the trade-in should be reported in the profit and loss statement" (cambridge, ex. 15.8c.)

so in the 'disposal of asset' account, there's CR 'loss on disposal of the asset' $400. would that mean the trade-in value is reported in the profit and loss statement under 'other expenses' as 'loss of disposal of the asset' $400? or would it be classified under 'other revenue' because it reduces the liability owed to the sundry creditor?

and also in general with all trade-in's is it expected you'd get a loss on disposal of the asset? coz there's no way the creditor would pay more than the carrying value... or maybe not?

thanks in advance guys!

Yeah, I agree with the 'Loss on Diposal of Asset (which I think is Cash Register)'. I think it should be reported under 'Other Expenses' in the P/L Statement. (since there is a 'Loss on Disposal of ____')

LOL. Umm... there can be a 'Profit on Disposal of Asset'.... sometimes. though in the Cambridge textbook... there are mainly 'Loss on Disposal of Asset.'

[LFTM]

This is the question my teacher was talking about, apparently the solutions are wrong so dont believe the solutions.

[eeps]

This is the question my teacher was talking about, apparently the solutions are wrong so dont believe the solutions.

LOL. Oh... right.. then you might not want my answer then. :S That was my answer based off my own knowledge... that's just me though... you might have a different answer. :\

my teacher said the same thing... he said it was funny question... he was like 'skip the question..' cause you can't really value the "Trade-In" in the P/L Statement. - It's not reported in the Proft and Loss Statement either, I don't think.

[LFTM]

This is the question my teacher was talking about, apparently the solutions are wrong so dont believe the solutions.

LOL. Oh... right.. then you might not want my answer then. :S That was my answer based off my own knowledge... that's just me though... you might have a different answer. :\

my teacher said the same thing... he said it was funny question... he was like 'skip the question..' cause you can't really value the "Trade-In" in the P/L Statement. - It's not reported in the Proft and Loss Statement either, I don't think.

Yeah this question also stumped my teacher, she had to go ask the head of accounting(whoever that is..) and apparently there is wrong info in the book also(cambridge). I can't recall all of what she said but apparently the only thing reported in the profit and loss is the loss/profit on disposal of the NCA.

[_avO]

Same my teacher told us about this one

She said its not a revenue or expense as it does not affect owner's equity, but it does affect assets and liabilities :/ its a lost item!!

[suzuna]

Same my teacher told us about this one

She said its not a revenue or expense as it does not affect owner's equity, but it does affect assets and liabilities :/ its a lost item!!

but i'm pretty sure the txtbk mentions somewhere that the trade-in is a revenue coz it's a reduction of what you owe the creditor? yet a tradein also has a loss on disposal of the asset which is an expense. i think i'm just confusing myself here lols... ==''

[_avO]

There are two two-fold effects that occur with a trade-in
One is the actual trade in, decreasing the amount owed to the sundry creditor. This is not a revenue as it does not increase owner's equity.
The other is the profit or loss on disposal of an asset as the carrying value (book value) is presumably overstated or understated. This is the revenue or expense.
So yes a trade-in can be a revenue and it can be an expense, but it's not so much the trade-in that establishes this, but rather what occurs after trading in the NCA i.e. the profit or loss on disposal of the asset

[suzuna]

There are two two-fold effects that occur with a trade-in
One is the actual trade in, decreasing the amount owed to the sundry creditor. This is not a revenue as it does not increase owner's equity.
The other is the profit or loss on disposal of an asset as the carrying value (book value) is presumably overstated or understated. This is the revenue or expense.
So yes a trade-in can be a revenue and it can be an expense, but it's not so much the trade-in that establishes this, but rather what occurs after trading in the NCA i.e. the profit or loss on disposal of the asset

ohhhh i finally get it now. thanks so much _avO !!!

[pooshwaltzer]

Biz reporting date is 30/06, credit purchase of $10000 linux server ($1000 GST) on 31/01/08, 4yr useful life with 2000 residual value, paid out invoice account on 01/02/08 traded in for $3200 on 30/09/10 for $15000 unix server ($1500 GST) purchased on credit, paid out on 15/10/10.

31/01/08:

Linux Server              10000
GST                          1000
  Credit Control                     11000

01/02/08
Credit Control            11000
  Cash at Bank                      11000

30/06/08

Depreciation               833
   Accum Depn                        833

30/06/09

Depreciation              2000
   Accum Depn                       2000

30/06/10

Depreciation              2000
   Accum Depn                       2000

30/09/10

Disposal of Asset                   10000
Depreciation               500
Accum Depn              4833
Sundry Creditor          3200
Loss on DoA              1467

Unix Server               15000
GST                          1500
  Credit Control                     13300
  Sundry Creditor                    3200

15/10/10

Credit Control            13300
  Cash at Bank                      13300