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hi, I have problem with revaluation loss charged against Revaluation reserves.Here are the past paper.
https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/p2int_2010_jun_q.pdf
https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/p2int_2010_jun_a.pdf
Working 6
I understand how to calculate revaluation gain, excess depreciation.
On balance sheet it would be :
CR PPE 3.56m
DR P/L 1.60m
DR Reval.Res. 1.96m
In answer I see there is charged loss of 1.6m. This is ok.
Now in Other comprehensive income there is revaluation adjustment of 1.60m? I thought it should be 1.96m loss not a gain of 1.60m??? Please help me on this.It depends on how the revaluation gain was treated and how much it was. If it has been previously revalued upwards and there is an amount in revaluation reserve relating to that asset, then the subsequent revaluation downwards is primarily against the remaining surplus in the revaluation account and any excess against income statement
OK?
Karmuks is misunderstanding what the credit to OCI of $1.6m actually represents. It’s not a revaluation gain, it’s an error correction. The whole amount of the revaluation loss had already been posted to OCI (as per the exam question). And once the loss has been worked out, a correcting entry is needed. The revaluation loss is $3.56 – and the whole lot had already been posted to OCI, when in fact, only $1.96m should’ve been posted to OCI. So to correct it:
Dr: income statement $1.6m
Cr: OCI $1.6mThe effect is that the income statement proper, is debited with the $1.6m that should’ve gone there in the first place, leaving the balance of $1.96m in OCI.
oohhh now I got it. With your help I understood why I did not understand. thank you for pointing me out that in question there was wrong treatment of revaluation loss. Loss was fully debited to OCI. Instead it should be debited only 1.96 (not 3.56). So the correcting entry must be made. Credit back 1.6 and debit income statement 1.6. Now its clear to me. Thank you very much for your help :))
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