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I did not understand this question. How it should be solved?
A limited liability company acquired building on 1st January 2001.
The building was revalued for the first time on 30th September 2003 to $120,000.
The company has a policy of depreciating building at 2% straight line basis with proportionate change in the year of acquisition ans assuming no residual value.
The transfer to the revaluation reserve for the building for the year ending 31st December 2003, was $16050.
What was the acquisition cost of the asset on 1st January 2001?Let’s consider the acquisition cost of the asset as X . We will have the follow equation :
16050 + (X – 0.055X)=120000 ( 0.055 is the depreciation ratio as 2% for year for 33 months from January 01 to September 03 – (2/100)/12*33 = 0.055
0.945X=120000-16050=103950
X=103950/0.945 = 110000
The acquisition cost on January 2001 was 110000.
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