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- June 1, 2018 at 12:39 am #455182
2009 cost 93500. Acc dep 43000
2008 cost 80000. Acc dep 48000During the year company revalued the carrying amount of its property upwards by £5m, the accumulated depreciation on these properties of £2m was reset to 0.
The answer is
1. Non current asset
Cost 80,000
Revaluation (5000-2000depciation) 3000
Disposal (10000)
balance c/f (93,500)
Cash flow for acq. 205002 depreciation
Balance b/f. 48000
Revaluation (2000)
Disposal (9000)
Balance c/f. (43000)
Difference charge for the year 6000The £2m depreciation is included in the working2, but why in the cost calculation as well?
June 1, 2018 at 5:01 am #455195Because the cost T account has been increased by only 3,000 whereas the total revaluation is 5,000
Think about the process of recording a revaluation … of that 5,000 increase, the first 2,000 will be used to ‘cancel’ the previous accumulated depreciation on that asset (Dr Accumulated Depreciation 2,000 and Cr Revaluation Reserve 2,000)
That now leaves just 3,000 more revaluation to account for, as follows:
Dr Asset Account 3,000 and Cr Revaluation Reserve 3,000
Better?
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