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As usual, its the wording of the question that is confusing me… not the accounting:
“a company bought a property 4 years ago on 1 Jan for 170,000. since then prices have risen and the property has been revalued at 210,000.
the property waqs estimated as having a useful life of 20 years when it was purchased. what is the balance on the revaluation surplus reported in the statement of financial position
a. 210,000
b. 136,000
c. 74,000
d 34,000”answer is c.
now…. 4 years ago means that we are on Jan 1 x5 …. is that correct?
if yes, then we are revaluing on jan 1 x5..is that correct?so on jan 1 the revaluation reserve wd be 74000 …
but the question is asking for the balance in sofp. but the sofp is made 31 dec x5 and that means, we must charge the excess depreciation to the reval reserve
i solved this question based on the above assumption.
had it said what is the balance on 1 jan x5, it wd have been 74000.
any comments?
You are assuming that firstly the company’s year end is in fact 31 December (it doesn’t have to be) and you are assuming that the question wants the balance as at the year end.
The question does not say either, and so it simply wants to know the balance at the date of the revaluation, which is (as you have calculated) 74,000.
hmmm.. thank u .. somehow i still think the mention of sofp makes it confusing…but i wd have gotten the answer right in the exam since i wd have ticked 74000 .. 🙂
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