subsequent to second revaluation, Dec 31, 20×7, the closing balance of Accumulated Depreciation should have been $150,000 (75+75), therefore, NBV of PPE was $975k.
That been said, and with reference to your explantion of closing balances of accounts affected after second revaluation, where which the PPE shall be reported at $ 600,000 as a net book value, what would the gross Net Book value and Accumulated Depreciation?
Hi . General reserve is referred to as the reserve fund that is created by keeping aside a part of profit earned by the business during the course of an accounting period. In this case revaluation gains.
If an asset is impaired we can charge the impairment loss to general reserve but only up to the value that the revaluation gains have at the time of the impairment.
hi Sir, thank you so much for teaching us i just have one question, why did we deduct 325 as impairment ( OCI ) ? we already used that from the surplus which cancels it off and remaining 50 as impairment why did we deduct 325 from OCI?
325 was already in OCI from previous revaluation and subsequent transfer of excess depreciation, at the start of year 20×7, so to net it off at the end of year we first set of 325 of Impairment to OCI and remaining to SPL
I don’t think it would be a mistake, but showing Nil could gain some marks. It would show the reviewer that you understand that OCI was some number before, and after entries there’s nothing left.
In this case, basically none to my opinion. If it was not stated that they did impairment review, if they just did year-end revaluation and got 600,000, we would do everything the same
The depreciation charge for the year that was recorded in the Statement of Profit or Loss for the year ended 31st Dec 20×7 should have been 50,000 rather than 75,000. The company wishes to transfer the excess depreciation charge to retained earnings directly from the revaluation surplus reserve.
The sentence below wasn’t use in the solution: The company opts to transfer any excess depreciation on the revalued amount to retained earnings. I think the 25, 25 excess will not be charged from the surplus. Pls I need more light on that.
akshataa says
Thankyou for lecture
Mirza says
Hi,
subsequent to second revaluation, Dec 31, 20×7, the closing balance of Accumulated Depreciation should have been $150,000 (75+75), therefore, NBV of PPE was $975k.
That been said, and with reference to your explantion of closing balances of accounts affected after second revaluation, where which the PPE shall be reported at $ 600,000 as a net book value, what would the gross Net Book value and Accumulated Depreciation?
Many thanks,
Mirza
Mirza says
cont….
is it $ 750k, unless the Accumulated Depreciation is reduced to zero? If so, is it zeroize and against what?
Thanks again
Mirza
Marco1989 says
Hello.
At 31/2007 do we also debit revaluation surplus for 25 and credit retained earning for 25? If so, why oic is not 350?
Thanks in advance
Maseketo says
Hi
what is the use of General Reserve account?
When an asset has been impaired can we charge the impaired loss to general reserve before taking the balance to profit or loss statement?
D.papaspyrou says
Hi . General reserve is referred to as the reserve fund that is created by keeping aside a part of profit earned by the business during the course of an accounting period. In this case revaluation gains.
If an asset is impaired we can charge the impairment loss to general reserve but only up to the value that the revaluation gains have at the time of the impairment.
sarrah006 says
hi Sir,
thank you so much for teaching us i just have one question, why did we deduct 325 as impairment ( OCI ) ? we already used that from the surplus which cancels it off and remaining 50 as impairment why did we deduct 325 from OCI?
irphern says
325 was already in OCI from previous revaluation and subsequent transfer of excess depreciation, at the start of year 20×7, so to net it off at the end of year we first set of 325 of Impairment to OCI and remaining to SPL
sarrah006 says
okay thanks
i didnt know oci carrys balance as well because i thought even oci is yearly basis
Meloman says
I like the slogan stick to that and you wont go too far wrong )
HarshSingh07 says
Sir , should we not first transfer 375 from ppe to impairment and then from impairment to sopl and oci
karang says
Hi
Can we not show Impairment at Nil in Other comprehensive income as we had 325 income and Loss of 325 in current year.
Will this be incorrect representation
mariakurina says
I don’t think it would be a mistake, but showing Nil could gain some marks. It would show the reviewer that you understand that OCI was some number before, and after entries there’s nothing left.
yasar89 says
Hi Cris,
What is the difference between impairment and revaluation downwards?
Please explain.
Thank you.
mariakurina says
In this case, basically none to my opinion. If it was not stated that they did impairment review, if they just did year-end revaluation and got 600,000, we would do everything the same
tugcem says
Hi,
Why we didn’t put on SFP revaluation surplus?
mariakurina says
What exactly? There’s a lot going on here and many accounting entries
aleonard013 says
Hello
Just to be sure … so here the « revaluation surplus » will be 0 right ?
Thanks
mariakurina says
Hi! Yes, exactly
Anooshaaziz says
From where that 50 came in depreciation?
irphern says
it is the depreciation amount that would have been charged had the asset had not been revalued.
depreciation= 1000/20
50 per annum
aarti2407 says
Sir, could you please upload a video on ‘Reversal of Impairment’ as well?
ali5185 says
Do we have to transfer excess depreciation to retained earnings every year?
P2-D2 says
We aren’t obliged to do so but it is best practice.
hrithikgoudar says
The depreciation charge for the year that was recorded in the Statement of Profit or Loss for the year ended 31st Dec 20×7 should have been 50,000 rather than 75,000. The company wishes to transfer the excess depreciation charge to retained earnings directly from the revaluation surplus reserve.
mariakurina says
Entries would be:
Dr Acc depreciation (SFP) 75,000
Cr Depreciation charge (SPL) 75,000
Dr Revaluation Surplus (SFP OCI) 25,000
Cr Retained Earnings (SFP) 25,000
shafiuahmad says
The sentence below wasn’t use in the solution:
The company opts to transfer any excess depreciation on the revalued amount to retained earnings.
I think the 25, 25 excess will not be charged from the surplus. Pls I need more light on that.
Thank you
MikeLittle says
It’s an optional transfer but generally considered to be ‘best practice’
OK?
joelsasi says
Nice explanation .Thank you.