- This topic has 8 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
Hello Sir
The building had an original cost of $900 0000 on 1 january 20Xo and was being depreciates over 50 years. it was judged to have a fair value on 30 june 20×8 of $950 000. At the year end date of 31 december 20×8 the fair value of the building was estimated at $1 200 000.
Carter uses the fair value model for investment
what amount will be shown in revaluation surplus at the year ended 31 December 20×9i got 950 less 6 months depreciation before substrate the difference from 1200. my revaluation is 261. but they answer just did 1200 -950 without 6month depreciation
i dont understand why.Did the company reclassify the building as an investment property as at 30 June 20×8?
Yes Sir I think so
Carter uses the fair value model for investment
this is all I got. bpp kit exercise 13 MCQ, case 4
Depreciation for 8.5 years at 18,000 per annum is 153,000 giving a value as at 30 June 2008 of 747,000
This is then valued at 30 June 2008 to 950,000 so a transfer to revaluation reserve of 203,000
It’s then revalued further as at the year end 31 December 2008 to 1,200,000 a further increase of 250,000
But the change in value of an investment property classified under the fair value model goes through the statement of profit or loss and not through revaluation reserve
According to me, the balance on the revaluation reserve in respect of this property is 203,000
How does that grab you?
yes Sir that is the answer but what i dont understand is why 950 000 – 747000 is the balance on the revaluation reserve as it on june 2008.
the question ask for the revaluation at the Y/E 31/12/08
1200 000 – (950 000 less 6 months depreciation)
im really confused1200 000 – (950 0000/48 x 6/12)
Because the movement up to $1,200,000 was in the six months AFTER it was reclassified as investment property under the fair value model and, as I stated in my last post, any movement in values goes through Statement of Profit or Loss and not through Revaluation Reserve.
Your original post caused me more than a little anxiety! You stated that the answer had simply taken “1,200 – 950 without 6 month depreciation”
That is very clearly NOT what the answer has done! If that had been the case the answer would have been 250 (and wrong). May I ask that, in future, you are very careful when posting a question and that you replicate the facts as they are given and not as you have interpreted them
Thanks
Incidentally, why in your calculation have you chosen to use 48 as the number of years over which depreciation needs to be charged? It falls for depreciation over 8.5 years up to 30 June 2008 and that leaves just 41.5 more years.
IF we were to be depreciating this building further based on the 950,000 valuation as at 30 June 2008, the depreciation calculation would have been (950 / 41.5) x 6/12
(But we’re not because it’s now classed as investment property and is therefore no longer subjected to depreciation)
- You must be logged in to reply to this topic.