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Please help with this.
This is take from BPP study text. Practice question n. 32 Elmgrove Co.
We are doing a cash flow statement and we are told that to arrive at the cash used in purchasing PPE the following calculation applies:
Revaluation surplus -31 (the asset disposed of had previously been revalued)
Cash addition (?) 165
Ok. So my problem is with the revaluation surplus. Why is the revaluation surplus considered in this calculation? The asset being disposed of is actually the asset the revaluation refers to. But if the carrying amount of the asset disposed of is 28 and that includes already the previous revaluation of 31, why do we bring in the revaluation again? Isnt this like double counting it?