BPP Study Text Exam Bank Q5, Gains (2012 and June 2014 edition)

Hi - sadly, I don't have access to the book. however, I believe that I can help you substantially, so all is not lost. From your post it seems that a new issue of shares has taken place to raise finance. 400,000 $1 equity shares issued at $1.40 gives, as you correctly point out, a premium on issue of $160,000 The cost of issuing 200,000 new shares as a bonus is covered by the capitalisation of the share premium account which therefore reduces by $200,000. the NET effect is, again as you have said, results in a reduction of the share premium account by $40,000 So you are absolutely correct so far The post about “assets held at cost were impaired by $25,000? will not affect revaluation account because there is no amount in the revaluation account relating to those specific assets! They are held at cost, not at a revalued amount Without more detail about the 80,000/10 and the 30,000/10 - sorry but without that greater detail I have no way of understanding what you are talking about. if you're still struggling, post again, but next time please give me all relevant information

The $15,000 would have been transferred ($5,000 x 3) from revaluation to retained earnings to compensate retained earnings for the additional depreciation charge over the three previous years. the revaluation reserve relating to this asset would therefore have been credited by $50,000 (on revaluation) and then debited by $15,000 (credit to retained earnings) as above That means that there is only $35,000 left in revaluation account relating to this asset. The asset is now sold so the gain is now a realised gain and is transferred out of revaluation reserve and credited to equity. Does that explain it for you?

Thanks that question is still in the book (Mar-17 til Jun-18), and I didn't fully understand it!