Tangible Non-Current Asset Question and Solution
Question: The non-current asset register shows a carrying amount for non-current assets of $85,600; the ledger accounts include a cost balance of $185,000 and an accumulated depreciation balance of $55,000. Which of the following statements may explain the discrepancy?
- The omission of an addition of land costing $30,000 from the ledger account and the omission of the disposal of an asset from the register (cost $25,600 and accumulated depreciation at depreciation at disposal $11,200.)
- The omission of the revaluation of an asset upwards by $16,600 and the depreciation charge of $20,000 from the ledger account and the omission of the disposal of an asset with a carrying amount of $41,000 from the register.
- The omission of the disposal of an asset from the ledger accounts (cost $25,600 and accumulated depreciation at disposal $11,200) and the omission of an addition of land costing $30,000 from the register.
- The omission of an upward revaluation by $16,400 from the register and the accidental debiting of the depreciation charge of $28,000 to the accumulated account.
Answer: In the question, we will find out why there are differences between the two books. In the question, * register- carrying amount in the asset = 85,600 *ledger- Cost balance of Asset= 185,000 Accumulated Depreciation = 55,000 So, carrying amount = (Cost- Accumulated Depreciation) >185,000 – 55,000= 130,000 So the difference between register and ledger = 130,000- 85,600 =44,400 Now we need to see which of the following options is responsible for the difference between the register and the ledger in the above question.
Option A: Here, “omission of an addition of land costing 30,000 from the ledger account”, if it happens ledger balance would reduce but in question ledger balance is high.
Again, “Omission of the disposal of an asset from the register”, if this happens carrying amount of asset 25,600-11,200=$14,400 would be higher in register but in question the balance is low. So, Option A is not possible.
Option B: Firstly, Omission of an upward revaluation of 16,600 from ledger account, if it happens ledger balance must be lower but ledger balance is high in question.
Again, Omission of depreciation charge of 20,000 from ledger, by omission of depreciation, the ledger balance is increasing so in this case it matches with the question.
Again, Omission of an asset disposal with carrying amount of 41,000 from the register, it means the disposal asset 41,000 is not reduced from the register. But for this case in register will be showed 41,000 higher where the register shows lower. So, option B is incorrect.
Option C: Omission of disposal of an asset from the ledger (cost 25600, accumulated depreciation 11200, carrying amount = 14400) that means disposal asset 14400 is not reducing from the ledger for this reason, the ledger amount is higher.
Again, the Omission of additional land costing 30000 from the register – 30000 additional lands is omitted from the register for this reason the balance of the register is lower. This argument is matching with the question. Total Impact= 14400 (extra in ledger) + 30000 (missing in register) = 44400. So, Option C is matched.
Option D: Omission of an upward revaluation by 16,400 from the register-if it would happen register will be lower which is reflected on the question.
Again, Accidental debiting of a depreciation charge of 28,000- means depreciation is mistakenly higher by 28,000, it might happen but in the ledger account carrying amount of the asset is supposed to be less but in question the ledger amount is high.
Total Impact= 16,400+ 28,000 = 44,400 Option D can be true but Option C is more appropriate than Option D.
So the answer is option C.
