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Hi
I’m a little bit confused with the revalution and accumulated depreciation. I know if you sell the asset or there’s an upward revaluation, you will derecognised the accumulated depreciation. But what about if there’s a fall in value of the asset?
Example
Asset bought 01/10/x2, value 1,000,000 amortisation 20 years VR=0
30/09/04 revalued 1,800,000
30/09/05 value fell 1,500,000Amortisation x2-x4 1,000,000/20= 50,000 *3 years= 150,000
New amortisation X5 1,800,000/18=100,000Upward revaluation, we derecognise Acc depreciation
Asset(DR) 800,000
AA (DR) 150,000
Rev Reserve(CR) 950,000Value falls do we derecognise the Acc depreciation or not?
Rev Reserve(DR) 300,000
Asset(CR) 300,000or?
Rev Reserve(DR) 200,000
AA (DR) 100,000
Asset(CR) 300,000Could you please clarify?
Am I right in my other assumption, if we sell the asset, or upward revaluation, we have to derecognise the acc depreciation?
Thanks
Pilar
Hi,
Sorry for the delay in getting back to you.
I’d firstly recognise the depreciation as it has been accruing during the year, so taking the asset down to 1,700,000 and then I’d adjust the value downwards, utilising the revaluation surplus first.
If you sell the asset then any remaining surplus is transferred through profit or loss.
You are correct on what you say too. If we revalue we remove the accumulated depreciation first and also if it is disposed of we remove the accumulated depreciation too.
Hope you’re well.
Thanks
Chris
Hi Chris
My last review before the exam….
Sorry for being a nightmare, but just to confirm
The solution is
Dr Revaluation reserve 200,000
Cr Asset 200,000Am I correct?
I promise I will let you know if I have passed the exam….
Thanks… muchas gracias!!!!!
Pilar
Yes, if it is revalued downwards then we CR the asset and utilise the revaluation reserve so DR the revaluation reserve. If there is not enough revaluation reserve then we take any extra reduction through profit or loss.
All the best of luck with the exam.
Thanks
Chris
Chris i have passed f1!!!!… thanks for all your help and support!!!!
Muchísimas gracias desde España!!!!
Pilar
Enhorabuena!
That’s great news. I’m so pleased for you as you put in hours of hard work.
I hope you enjoyed celebrating.
Good luck with the rest of the studies and hope to hear from you in the future of F2.
Chris
@gmolathiwa said:
What will be happening where by we DR Asset: CR Rev SurplusHi,
Can you start this in a new thread and be a bit more specific with regards to your question.
Thanks
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