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September 27, 2020 at 4:55 pm
Hi, I was wondering.. why the amount of 1,588 is not shown as part of equity in the statement of financial position? (under Retained earnings).
September 5, 2020 at 8:33 am
I was wondering why the depreciation period was calculated over 17 years when the original useful life is 20 years and we have already depreciatied 3 years ( 2012/2013/2014) before revaluation. 2015 should have been the fourth year and therefore the depreciation after revaluation over 16 years wich is the rest of the useful life ?
September 6, 2020 at 8:08 am
I got it – my mistake
August 9, 2020 at 12:31 am
Got it till here but what about the subsequent years where revalued amount remains same as 95M and dep exp is 5588? Each year its going from revaluation reserve to retained earnings as 1588?
If yes or no how can it be explained?
Also do we have any question where 2 time revaluation occurs? How to treat it as second time?
June 1, 2020 at 2:40 pm
Im still kind of confused so will talk you through my workings
Dr BS PPE 27k
Cr BS Revaluation Reserve (RR) 27k
Dr PL depreciation 5,588
Cr BS PPE 5,588
So at this stage we have
PPE of 89,412
Dep of 5,588
RR of 27,000
Now I understand the excess depreciation is 1,588 so I
Dr RR 1,588
Where does the cr go?
June 1, 2020 at 2:46 pm
Ignore this – I got the answer. Should have continued watching the video 🙂
May 5, 2020 at 7:07 pm
I think OCI and revaluation reserve cannot go at the same time
DR Asset 27k
CR OCI 27k
DR OCI 27K
CR SPLOCI 27K
DR depn 5588
CR SPLOCI 5588
And charge excess depn from reserves and surplus
we can either transfer the 27000 in SPL (OCI) or in revelation reserve .sir has credited SPLOCI by 27000 and also is showing revaluation reserve in SFP by 27000 less 1588.This is not possible
April 14, 2020 at 6:21 pm
November 1, 2019 at 7:19 pm
Can someone please explain the double entry to OCI element. I cant seem to figure it out.
DR Asset 17000
DR acc deptn 12000
CR rev surplus 27000
how do we post OCI
please ignore the additional depreciation element for now.
Help v much appreciated.
October 1, 2019 at 3:54 pm
Please, what happens to excess depreciation charge if the useful life of an asset is reviewed downward causing the depreciation charge to be less than it was before the review. Do we simply treat the excess amount as normal by crediting the retained earnings and debiting the revaluation surplus (through SOCE)?.
October 1, 2019 at 3:55 pm
Causing the depreciation charge to be more that it was before review i mean
November 18, 2019 at 2:04 pm
The excess depreciation is transferred from revaluation surplus to retained earnings as the benefit realized at the reporting date.
October 1, 2019 at 1:47 pm
Thank you Opentuition.
August 29, 2019 at 12:02 pm
Thank you for the lecture video above.
Sir, if assuming there are entries such as excess depreciation or disposal of a revalued asset, where we Credit our Retained earnings, are we supposed to show the similar resulting effects in our P/L as well?
September 18, 2018 at 11:13 am
Why to do CR accumulated depreciation?
May 20, 2019 at 2:17 pm
We need to remove the accumulated depreciation to get back to the original cost, and so therefore it is debited (not credited!).
September 28, 2019 at 11:19 pm
Why do we need to get back to the original cost rather than from 2015 adding new depreciation to accumulated dep?
This asset is effectively treated as a new asset, isn’t? If we reserve the accumulated dep are not understated accumulated depreciation?
September 29, 2019 at 8:05 am
So that we can revalue the asset upwards to its new value. The total revaluation is effectively done in two stages. Firstly we are taking the current carrying value to the original cost and secondly increasing the cost to the new value of the asset.
Any new depreciation is then recorded in the usual fashion using the depreciation expense account and the accumulated depreciation account.
January 6, 2020 at 9:02 pm
Thank you Chris. I believe that a lot of students like me were scratching their heads about the journal entry for the 27k gain in OCI :). Thank you for your reply indeed ? all makes sense now
July 25, 2018 at 2:40 am
What about the statement of changes in equity? Would the revaluation reserve also go there?
July 25, 2018 at 2:58 am
Under the Revaluation Surplus heading?
July 19, 2018 at 12:47 pm
The gain is recorded in the revaluation reserve, which is part of equity on the statement of financial position. All the company’s gains/losses are then disclosed in the statement of profit and loss and other comprehensive income, so as the gain has not been realised it is shown in OCI. There is no additional journal entry for this, it is just purely a matter of presentation.
July 23, 2019 at 5:28 pm
I just read your comments which has answered my question. I’m very grateful for this clarification as I kept thinking what was the double entry for the OCI? if the revaluation gain is recognised in the Revaluation reserve (in the SoFP).
January 26, 2020 at 1:18 pm
thanks a lot for the clarification
July 19, 2018 at 9:17 am
sorry I think I asked this question already but can’t find it in the comment history.
I am getting hung up the designated account for revaluation gain: are we posting to the revaluation reserve in SOFP (Equity – Other Income) or OCI?
I particularly mean the following JE:
DB – Assets SOFP – increase by diff. Reval. and actual cost
DB – Accumm. depr SOFP – remove depr. to date
CR – Revaluation Reserve – Equity or OCI?
DB – Revaluation Reserve – Equity or OCI?
CR – Retained Earnings
Also instructed by IAS1 – Disclose Revaluation Gain in OCI – is this a ‘second’ step and the initial JE posts to SOFP – Other Income?
Hope my question makes sense!
December 29, 2018 at 12:22 pm
I would suggest to use the T-accounts to understand these type of accounting entries.
Initially we need to Debit the PPE and Acc. Depn accounts by 15,000 and 12,000, respectively, and credit the Revaluation Reserve account (not the SFP directly) by 27,000. Then the increase in depreciation of 1,588 (5,588-4,000) will need to be debited to the revaluation reserve account (not the SFP directly) and credited to the SPLOCI (under the OCI section).
As the Revaluation Reserve is an Equity element therefore the ending account balance of 25,412 (Cr 27,000 – Dr 1,588) at the year end (31-12-15) will be shown will be shown as the revaluation reserve under the Equity section in the SFP.
Hope this helps!
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