mini exercise ( non current assets ) Q1

NWNo way10y ago

Trial balance extracts for year ended 31 March, 2011 Land and buildings at cost 270,000 Plant at cost 156,000 Accumulated depreciation to 31 March 2010 Building 60,000 Plant 26,000 Rental of leased plant 22,000 The land and buildings were purchased on 1 April 1995. The cost of the land was $70 million. No land and buildings have been purchased by Kala since that date. On 1 April 2010 Kala had its land and buildings professionally valued at $80 million and $175 million respectively. The directors wish to incorporate these values into the financial statements. The estimated life of the buildings was originally 50 years and the remaining life has not changed as a result of the valuation. m not understanding the part how we have got DR Revaluation reserve 1,000 CR S of Comp Inc 1,000. can you please explain ?

MikeLittleTutor10y ago#1

Surely this is an annual transfer (encouraged but not required) from revaluation reserve to retained earnings to compensate retained earnings for having to suffer the excess depreciation charge this year (and every year) subsequent to the revaluation Better?

NWNo way10y ago#2

So the entry should be DR Revaluation surplus (SoFP) 1000 CR Retained earning (SoFP) 1000 Why do you use the line CR Sofcomp Inc? Thanks

MikeLittleTutor10y ago#3

If you accept that the revaluation itself should go through Comprehensive Income (and thence into statement of changes in equity) then surely the transfer from revaluation reserve to retained earnings should also go through Comprehensive Income (and also into statement of changes in equity) OK?