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During the year ended 31 March 2013 Woolf sold a property for a $1,550,000. The property was purchased on 1 July 2000 for $ 100,000 but had been revalued to $1,900,000 on 31 March 2010. Woolf depriciates its properties buildings on a straight line basis over the life of the lease, with a full year’s depreciation in the year of acquisition and none in the year of disposal.
Woolf revalues another property to $2,000,000 on 31 March 2013. Its historical cost was $1,000,000 and accumulated depreciation on the property was $350,000.How are these transactions reflected in other comprehensive income and profit or loss?
It would be exceedingly kind of you to clarify three points for me before I can answer you:
1) “The property was purchased on 1 July 2000 …” – do you mean “purchased”
2) “on 1 July 2000 for $ 100,000” – are you totally sure that the figure is $100,000?
3) “a straight line basis over the life of the lease” – do I have to guess the life of the lease?
I typed question as in Bank so I was also doubt about this question and I think this is uncorrect question.
Thank you SirOk, let’s make of this what we can.
When a revalued property is sold, the balance relating to that property that still sits to the credit of Revaluation Reserve is transferred to Retained Earnings by debit / credit within Statement of Changes in Equity
The revaluation gain of $1,350,000 on the second property is credited to Revaluation Reserve and debited to the property account
The gain is also shown as a credit in the statement of other comprehensive income
But without full information I can’t take you through the problem step by step
Sorry 🙁
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