MGT101 GDB # 2 --Due Date Wednesday, January 23, 2013-- -- Marks 4--

[WaleedSubhani]

[samra tariq]

First waly k bary mren I'm not sure but I think the rate used should be 15-20% because business wants to change its policy from 2012 onwards  and the balance sheet is prepared on 31st dec. 2012

Aur 2nd men shayad loss (balance amount) p/l account men charge hoga us sal k jis men building ko revalue kiya gaya.

If anyone of you think that I'm wrong, please correct me...

Thanks... 

[ABBAS AHMED]

In question A, You need to understand first what type of business are going in the above company. Second depreciation would not apply on land because of its life not fixed. U may calculate last depreciation done in inventory (only in this case) by applying previous and new rates....variances would be listed to know the exact inventory value at the of Dec-2012.

[samra tariq]

Thanks sir, I'm trying to understand your point.It is clear that land has no depreciation but rest of your points please elaborate them in detail...

Thanks...

[ABBAS AHMED]

 a reduction in value in inventory is not possible in term of depreciation until or unless U fully understand "nature of business" clearly defined. Most of the business have inventory with its expiry date/bar codes system which indicates that items expired or to be expired....In automobile company either inventory which is available have limited life or items which are finally produced in shape of CAR are not going to sale because of less market growth.....So in the second case, you would charge depreciation according to company policy which has been mentioned.  Otherwise it would lead to cost of goods sold and closing balance which require in the financial statement.....So in my opinion there would be no depreciation charged on both inventory and land in this case...

[Abdul Majid]

Brother u r right.In this case no depreciation will charge on inventory and land

[Muhammad Umair]

Keep one thing in mind there is never dep'n charged on land its always amortization

[ABBAS AHMED]

In second question: there are two methods being used in revaluation of assets, cost methods and revaluation method surplus methods....In case of surplus you would increase assets value (Assets Dr and Rev.Surplus Cr.) and in case of loss you need to reverse it: Rev. Surplus Dr. Assets Cr. just add your understanding in shape of logicl facts

[Charming Kḫaṋ]

[samra tariq]

Thanks and please explain part (a) also...

[ABBAS AHMED]

Just mention that no depreciation would be charged on inventory and land, reason: there is no fixed life of land as well as inventory returns its value after sales of goods. simple

[samra tariq]

Please somebody discuss part (a), mujhy uski bilkul samajh nahi aa rahe...

[ABBAS AHMED]

ap ko samjhnay ky lye main concept samjhna hoo ga.....depreciation kyon charge kartay hain kah assets ki fair market value malooom ho sakay...inventory resale kay baad apni value return karti hai jab kahl land bhi apni value selling karnay par return kar deta hai....belkah zaida value deta hai......ab dedpreciation ka main concept in par apply nahn hoga.....which reduced the value of assets to know exact current value..chapter for discussion being closed