Thanks for your help _avO!!
Sorry I wrote the wrong thing for question 1, it's actually supposed to be:
"In a small local business, the 4 business owners have decided to donate a day's work to help a local charity. They usually earn $100 a day which will be deducted from their week's pay".
Is it still the same principle/solution even though they are not giving money and the business is actually saving $400? (If that makes sense?)
I'm unsure of the answer as the only thing the business is losing is 'time' which can't really be valued. What I would do is just recognise the event as irrelevant to the business' entity. The business loses productivity but you don't record that in your statements.
The second question I understand although I'm unsure as to what amount to enter as the cost was $0. If I use cost price then the transaction would have no effect on accounts at all would they? Or do I use the selling price but wouldn't this go against the historical cost principle? I'm really not sure what to do with this one.
Yeah since there is no monetary effect then I wouldn't record it
- If there is damage to a non current asset that makes it unusable, what is the name of this account? Ie. for stock it is called stock loss but what do you call the account if it does not involve stock?
Under the AASB 136 -
Impairment of Assets, when an asset is damaged it is recognised as depreciation, it is then deducted from the initial value of the asset. In this case if an asset is damaged to the extent that it is unusable, then the Recoverable amount is $0, and the useful life is 0 years.
EG.
Depreciation Expense = (Historical cost - Recoverable amount)/Useful life
= ($10,000 - 0)/0
= $10,000
Carrying value = HC - Dep'n Exp
= $10000 - $10000
= $0
So you basically write off the asset as it no longer holds any future economic benefit and theres no probable outcome of liquidating the asset
- Do you happen to know how to account for a 'lease' of a non current asset?
No idea ><
IF i were to guess, then I would record it as this
DR - NCA $20000
CR - Lease liability $25000
DR - Lease charges/interest $5000
And when you make a repayment at any point it would be
DR - Lease liability $$$$
CR Cash at bank $$$$
When you repay interest
DR - Lease charges/interest $$$
CR - Cash at bank $$$
As well as during the Balance Day adjustment period
DR - Depreciation expense: NCA $$$$$
CR - Accumulated Dep'n: NCA $$$$$