Just for my understanding, would there also be (1) figure in OCE being the extra depreciation which would then be transferred to retained earnings or does this not happen with a change in estimated useful life. Thanks
M
Manish·
Yes, you are right, there are two possible ways to deal with it:-
a) We have to transfer 1 million amount to retained earnings.
The entry each year would be :-
Dr. Revaluation Surplus 1 million
Cr. Retained Earnings 1 million
Or:-
b) We can transfer full amount of excess depreciation at the end of useful life of asset to Retained Earnings from Revaluation Surplus
J
jasonjk·
So you all are saying it can be treated as a revaluation? Why no where else says that?
2015 under new estimated life WDV= 14m Depn chg= 3.5m
2015 under old estimated life WDV= 15m Depn chg= 2.5m
Then recording as a revaluation u would then have to credit PPE and debit Impairment on the income stmt, which makes no sense as the actual depn would not be shown properly, so i do not understand what you all are saying above.
Just for my understanding, would there also be (1) figure in OCE being the extra depreciation which would then be transferred to retained earnings or does this not happen with a change in estimated useful life. Thanks
a) We have to transfer 1 million amount to retained earnings.
The entry each year would be :-
Dr. Revaluation Surplus 1 million
Cr. Retained Earnings 1 million
Or:-
b) We can transfer full amount of excess depreciation at the end of useful life of asset to Retained Earnings from Revaluation Surplus
2015 under new estimated life WDV= 14m Depn chg= 3.5m
2015 under old estimated life WDV= 15m Depn chg= 2.5m
Then recording as a revaluation u would then have to credit PPE and debit Impairment on the income stmt, which makes no sense as the actual depn would not be shown properly, so i do not understand what you all are saying above.