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Hello john,
Hope you’re doing well,when there is a loss or profit we record it in SOPL, but here in this question why would it be nil. And also once a revalued asset is disposed we take the balance in revaluation and transfer it to retained earnings, but before doing that shouldn’t we record the loss in SOPL
There is no loss in the SOPL because the asset was sold for more than it’s original cost.
When it was revalued, the surplus will have been kept separate in the Revaluation Reserve (and will not have appeared in the SOPL). When it is sold for less that the revalued amount it effectively means that the surplus put to the Revaluation Reserve had been too high. So we reduce the surplus.
Since the asset has now been sold, the amount left in the revaluation reserve no longer needs to be kept separate and is transferred to retained earnings because it is now distributable.
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