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Hello
In example 2 on Revaluation decrease when the impairement takes place (on 31.12.2015) we have the following balances:
PPE dt 14 000 000
Acc.depr. Ct 1 750 000 (Depr. exp. Dt 1 750 000)
Reval. reserve/surplus ct 3 850 000
Retained earn. Ct 550 000
Is that correct?As the asset value falls to 8 000 000, we credit PPE acc with $6 000 000 but where should debits go?
Should we clear Revaluation surplus and Retained earnings accounts to have zero balances?
Should we post dt $2 150 000 as an expense in SPL?
Should a credit balance on Accumulated depreciation acc of 1750 000 stay there ?Could you please speciy which accounts and with what amounts will be affected when the impairement takes place on 31.12.2015?
Thank you!Hi,
The revaluation surplus is cleared first as you say, and the extra amount then take through profit or loss. So your entries would be correct.
There is no specific account that should be used to reduce the value of the PPE but it is usually taken to the accumulated depreciation, so this is where you would likely see the asset reduced.
Thanks
Hi,
So, would the following journal be correct?
Accum. Depr. (SFP) CT 4 250
RE (SFP) DT 550
Rev. Surpl. (SFP) DT 3850
Expense (SPL) DT 400 (I guess I’ve made a mistake in my previous question
writting 2 150 as an expense )But actually the debits don’t equal credits in this entry, please advise.
And on the face of Statement of finanacial position would the 8 000 (= 14 000 – 4250 – 1750) be recognised as a carrying value of the asset?
Thank you!
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