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Hello,
many thanks for excellent lectures on F7!Would you be so kind to help me on this one.
My doubts are:
1/ The value of land&builings after revaluation is given, however this provides no information on the amount of revaluation. I take it from answers that revaluation reserve is 18,000, but how should I reach such a conclusion?
2/ I don’t know how land & buildings are revalued respectively (why split 2/8 in answers?) before reval and how much both were revalued…
3/ How is the transfer of Reval Res to Ret. Ear. calculated?
Many thanks in advance.Question 12
The company had been carrying land and buildings at depreciated cost, but due to a recent rise in property prices, it decided to revalue its property on 1 October; 2011 to market value. An independent valuer confirmed the value of the property at $60 million (land element $12million) as at that date and the directors accepted this valuation. The property had a remaining life of 16 years at the date of its revaluation.
A transfer from the revaluation reserve to retained earnings will be made in respect of the realisation of the revaluation reserve. Ignore deferred tax on the revaluation.
Plant and equipment is depreciated at 15% per annum using the reducing balance method.
No depreciation has yet been charged on any non-current asset for the year ended 30 September, 2012. All depreciation is charged to cost of sales.Mine too!
It’s an extract from Q2 in the December 2012 exam. The missing bits are:
Land and buildings at cost (land element $10 million) (note (iv)) 50,000
Accumulated depreciation at 1 October 2011: 8,000
Thanks for pointing it out to me!
Same thing might be ( if I am not wrong ) in q. 13 p.208 – in the answers there’s depreciation of 13,200 which I believe may not be attributed to any item stated in the question, it also lacks basis to calculate the amount of revaluation surplus
Question 13
On 1 October, 2012, the company terminated the production of one of its product lines. From this date, the plant used to manufacture the product has been actively marketed at an advertised price of $4·2 million which is considered realistic. It is included in the trial balance at a cost of $9 million with accumulated depreciation (at 1 April 2012) of $5 million.
On 1 April, 2012, the directors decided that the financial statements would show an improved position if the land and buildings were revalued to market value. At that date, an independent valuer valued the land at $12 million and the buildings at $35 million and these valuations were accepted by the directors. The remaining life of the buildings at that date was 14 years. A transfer to retained earnings for excess depreciation is not made. Ignore deferred tax on the revaluation surplus.
Plant and equipment is depreciated at 20% per annum using the reducing balance method and time apportioned as appropriate.
All depreciation is charged to cost of sales, but none has yet been charged on any non-current asset for the year ended 31 March. 2013
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