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Hi sir,
Can you help me complete this narrative for revaluation decrease. I’m following the format as given by tutor chris but cant seem to wrap my head according to this question.
Trial balance extract as at 1/4/20×4:
PPE (UL: 20years) Dr 12, 000
Accumulated depreciation: Cr 3600 (6 years accumulated)1/10/x4: PPE revaluation 10,800. Question ask to find for 31/3/x5
My incomplete solution
Narrative HC Revaluation Reserve
@1.4.20×4 12000A’ltd D’prctn
(12000/20 x 6/12) (300)
——————————————————————
@1.10.×4 (CV) 11,700 10,800 900 (idk if this goes to SOCI or SOCE?)A’ltd D’prctn
(10,800/13.5 years) A (400) C (OCI?)
——————————————————————-
@31/3/x5 CV c/f B 10,400 NIL or Value “D”
(where this goes?)I need to know the values for A B C and D (whether its suppose to have a value or actually must be NIL? Does B need to equal to 10,400?
My format got skewed. Imagine theres a vertical line next to “HC” which goes down to ‘c/f B’
I hope u get what i mean… Thanks
Hi,
It looks like you’ve omitted the accumulated depreciation from your workings. You have correctly included the cost of 12,000 but we revalue from the carrying value to the revalued amount, so you need to deduct the accumulated depreciation of 3,600 from the cost of 12,000 to get 8,400.
You are then correct to charge the 6-months of depreciation equating to 300, and then you can revalue the asset.
Try doing the question again, using the information above and see if you get any further with your answer.
Let me know how you get on and if you are still struggling.
Thanks
Okay.. so i get
Cost 12000 – 3600 (acltd dprctn 1/4/x4)= 8400 – 300 (dprct for the year X4, 6 months) = CV at 1/10/x4 = 8100 compared with revalued amoung 10800. So the difference of 2700 will be a revaluation gain/surplus right?Then what happens to the value further depreciation under the HC column when compared to revaluation of 10400 on 31/3/x5. Can you show me the complete answers like all the necessary firgures to be included in the sopl and sofp i dont quite understand this thing.. like the point is what? to get/account for what values to put in what statements.
Hi,
Correct, the difference between the carrying value and the revalued amount is the revaluation gain/surplus that is recognised through OCI.
Once you’ve revalued the asset, it is then depreciated over its remaining useful life, again try to work this out as it will be for the remaining six months of the year. You can then total up the two amounts calculated for the depreciation over the full twelve months and this figure then appears in profit or loss.
The figure calculated after deducting the last six months depreciation is the carrying value at the end of the year, which will appear in the SFP.
Then, if you’re crazy, you can try and work out the excess depreciation for the last six months of the year and perform the reserve transfer. However, I’d not recommend that you try this as it is just a bit too hard and there will be easier parts in the exam.
Thanks
LOL i am crazy about f7 now. I’m planning to do all the questions in the exam kit. Dang i want to finish this stuff so bad.
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