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i understand the question and workings up until they Dr revaluation of 1000 and cr SOCI 1000, why have they done this?I have worked out the depeciation of 5000 and know the value of each asset but I am very confused where the 1000 has come from would you pleae help?
Thanks
JemmaWhat do you mean cr SOCI? If you dr revaluation then you cr Retained earnings. You show this revaluation as a gain on revaluation in other comprehensive income
That’s what the answer reads and I don’t get why it is $1000, have you managed to do this question?
Question 6 in the opentuition mini exercises and first question of non current assets ….
Thank u
Jemma, I don’t have it in front of me but it sounds like an asset has been revalued by $5,000 and that asset has a five year estimated remaining useful life
Am I right so far?
After revaluation, the company will be charging depreciation on the new carrying value of the asset. But why should retained earnings suffer that extra hit of the depreciation on the revaluation increase?
That’s right – it shouldn’t!
So (although it’s not mandatory, it’s seen as good practice) each year an amount equal to that extra depreciation on the revaluation amount could be (and here, it is) transferred to the retained earnings ….. Dr Revaluation Reserve, Credit Retained Earnings with that amount also being included within Statement of Comprehensive Income
OK?
Ogundimu, have you checked out the mini-exercises at the back of the F7 course notes, free on this site? Somewhere around page 200
@mikelittle said:
Jemma, I don’t have it in front of me but it sounds like an asset has been revalued by $5,000 and that asset has a five year estimated remaining useful lifeAm I right so far?
After revaluation, the company will be charging depreciation on the new carrying value of the asset. But why should retained earnings suffer that extra hit of the depreciation on the revaluation increase?
That’s right – it shouldn’t!
So (although it’s not mandatory, it’s seen as good practice) each year an amount equal to that extra depreciation on the revaluation amount could be (and here, it is) transferred to the retained earnings ….. Dr Revaluation Reserve, Credit Retained Earnings with that amount also being included within Statement of Comprehensive Income
OK?
I dont understand where $1000 comes from, the question doesnot mention anything abt that $1000 and I DO NOT understand ur explanation, can you make it more clear?
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