A purchased the property costing 750000 on 1 jan 2004 with useful economic life of 10 yrs. it has no residual value. At 31 dec 2004 the propert was valued at 810,000 resulting in a gain on revaluation being recorded in OCI. There was no change in its useful life. D does not make a transfer to realised profits in respect of excess depreciation on revalued assets.
on 31 dec 2006 the property was sold for 900000.
I got CV on dec 2006 = 630
sale proceeds 900
so profit on disposal 270
sir but how should we treat on SOFP?
in book it is given as,
dr revaluation surplus 135
cr retained earning 135
I did not understand above adjustment
materials cost given as 100000. but in question it is said 10,000 material cost was spoiled and a further 15000 was incurred. sir why that further 15000 is called abnormal cost. ? isn’t it just that spoiled one abnormal?
What do you not understand about the $135,000 release from Revaluation Reserve to Retained Earnings?
Where’s the second question from, Sasha? It doesn’t sound like an F7 question
sir in 1st question, our gain is 135000 recorded in OCI. on disposal of asset why that entry of dr revaluation surplus 135000 cr retained earning is made?
2nd question was extracted from kaplan book. it has asked to calculate cost of building included in non-tangible assets.
materials cost given in table as 100000. then below , it has said materials costs were greater than anticipated. it was found that materials costing 10,000 and a further 15000 was incurred as a result of faulty design work
i did understand the spoiled part cost is not recorded in cost of building but why not that further 15000 recorded?
Because there’s no need to keep it in revaluation reserve – the profit is realised so transfer it into retained earnings
What’s the question name and what’s the year end accounting date? (Month and year)
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