- March 26, 2017 at 5:56 pm
I’m a little bit confused with the revalution and accumulated depreciation. I know if you sell the asset or there’s an upward revaluation, you will derecognised the accumulated depreciation. But what about if there’s a fall in value of the asset?
Asset bought 01/10/x2, value 1,000,000 amortisation 20 years VR=0
30/09/04 revalued 1,800,000
30/09/05 value fell 1,500,000
Amortisation x2-x4 1,000,000/20= 50,000 *3 years= 150,000
New amortisation X5 1,800,000/18=100,000
Upward revaluation, we derecognise Acc depreciation
AA (DR) 150,000
Rev Reserve(CR) 950,000
Value falls do we derecognise the Acc depreciation or not?
Rev Reserve(DR) 300,000
Rev Reserve(DR) 200,000
AA (DR) 100,000
Could you please clarify?
Am I right in my other assumption, if we sell the asset, or upward revaluation, we have to derecognise the acc depreciation?
PilarApril 19, 2017 at 8:34 pm
Sorry for the delay in getting back to you.
I’d firstly recognise the depreciation as it has been accruing during the year, so taking the asset down to 1,700,000 and then I’d adjust the value downwards, utilising the revaluation surplus first.
If you sell the asset then any remaining surplus is transferred through profit or loss.
You are correct on what you say too. If we revalue we remove the accumulated depreciation first and also if it is disposed of we remove the accumulated depreciation too.
Hope you’re well.
ChrisMay 17, 2017 at 7:56 pm
My last review before the exam….
Sorry for being a nightmare, but just to confirm
The solution is
Dr Revaluation reserve 200,000
Cr Asset 200,000
Am I correct?
I promise I will let you know if I have passed the exam….
Thanks… muchas gracias!!!!!
PilarMay 18, 2017 at 9:27 pm
Yes, if it is revalued downwards then we CR the asset and utilise the revaluation reserve so DR the revaluation reserve. If there is not enough revaluation reserve then we take any extra reduction through profit or loss.
All the best of luck with the exam.
ChrisJune 2, 2017 at 8:51 pm
Chris i have passed f1!!!!… thanks for all your help and support!!!!
Muchísimas gracias desde España!!!!
PilarJune 4, 2017 at 9:25 pm
That’s great news. I’m so pleased for you as you put in hours of hard work.
I hope you enjoyed celebrating.
Good luck with the rest of the studies and hope to hear from you in the future of F2.
ChrisDecember 3, 2018 at 2:24 pm
What will be happening where by we DR Asset: CR Rev Surplus
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