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Hi Mike
Please help 2 question and explain, I have no answer for the below question and do not understand. Thank you
1) Moffat adopted the IAS 16 revaluation model on 31Dec 20X5. On this date the historical cost carrying amount of its property was $120,000 and its fair value was $460,000. The property had a remaining useful life of 20 years. At 31Dec 20×6 the fair value of the property had fallen to $430,000.
What is the balance on the revaluation reserve at 31December 20×6?
A. $310,000
B. $316,000
C. $330,000
D. $340,0002) On 1 Jan 2010, Stirling purchased a building for $500,000, charging depreciation straight line over 25 years.
On 1 Jan 2013, the building was revalued to its fair value of $644,000, with no change to its remaining useful life.
On 1 Jan 14, the building was sold for $800,000.
What is the profit on disposal, to the nearest $’000, to be recorded in Stirling’s statement of profit or loss for the year ended 31 Dec 2014, according to IAS 16 Property, Plant & Equipment?
A. $212,000
B. $180,000
C. $360,000
D. $376,0001) I would go for $310,000
2) Can you check your figures again, please (or give me the reference where I can find the question?) My answer does not appear in the list of options available!
My sincere apologise. Typing error on question 2 on 2paragraph.
On 1 Jan 2013 (should be 1Jan 2012), the building was revalued to its fair value of $644,000, with no change to its remaining useful life.
Thank you
Hi Mike
Please explain in details how you obtain these two answers as I totally lose and no idea how to work up. Thank youI assume that both my answers are correct!
“1) Moffat adopted the IAS 16 revaluation model on 31Dec 20X5. On this date the historical cost carrying amount of its property was $120,000 and its fair value was $460,000. The property had a remaining useful life of 20 years. At 31Dec 20×6 the fair value of the property had fallen to $430,000.”
31 December, 2015 revalue by $340,000 to $460,000 and charge depreciation at the rate of $23,000 each year
Carrying value at 31 December, 2016 depreciated down from $460,000 by $23,000 to $437,000 so now need to impair by $7,000 (Dr Revaluation Reserve, Cr TNCA) so Revaluation Reserve falls down from $340,000 by $7,000 to $333,000
And don’t now ask where I got $310,000 from! I can’t see how I got there! And I can’t see $333,000 as an option in the 4 possibles
What does the suggested solution say?
“2) On 1 Jan 2010, Stirling purchased a building for $500,000, charging depreciation straight line over 25 years.
On 1 Jan 2012, the building was revalued to its fair value of $644,000, with no change to its remaining useful life.
On 1 Jan 14, the building was sold for $800,000.
What is the profit on disposal, to the nearest $’000, to be recorded in Stirling’s statement of profit or loss for the year ended 31 Dec 2014, according to IAS 16 Property, Plant & Equipment?”
Bought 1 January, 2010 for $500,000, 25 year life, $20,000 depreciation each year
Depreciate 2 years to 31 December, 2011 brings carrying value down from $500,000 by $40,000 to $460,000
Revalue on 1 January, 2012 from $460,000 by $184,000 to $644,000, depreciate at $644,000, / 23 years’ remaining useful life (because it started with a 25 year life and it’s now 2 years old) so $28,000 each year
Depreciate 2 years to 31 December, 2013 brings carrying value down from $644,000 by $56,000 to $588,000
Sell for $800,000 gives a profit on disposal of $800,000 less $588,000 = $212,000
What does the suggested solution say?
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