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Hi Sir,
I was just doing June 2012 question Fresco and I came across something which is troubling me
In note No. 2 it says “Fresco makes an annual transfer to retained profits to reflect the realization of the revaluation surplus”. What to do with this? Plz tell me as soon as possible as the exam is just after 1 day
Thanks in Advance
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You have to calculate the Depreciation if no revaluation occoured and calculate the depriciation after revaluation
The increase in depriciation is removed from revaluation reserve and added to retained earningsYou are essentially correct Gogeta. But the transfer from Revaluation Reserve to retained Earnings through the Statement of Changes in Equity is not mandatory. It is seen as good practice. Nevertheless, be aware of the possibility that this could be asked. I saw a past exam question recently where the “creation of the Revaluation Reserve represented the surplus on the revaluation of TNCA net of the deferred tax at 20% associated with that revaluation”
The Revaluation Reserve had a figure of 2,000 (nil brought forward) so this was an increase of 2,500 less the 20% on 2,500 deferred tax
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