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land/bldg at cost…… 840m (90m is land)
accumulated dep …. 120m (as on 1 jan x2)on 31 dec x2, land/bldg was revalued to 760m (including 100m for land)
the company follows the revaluation model of ias 16, but no revaluations had previously been necessary. the company wishes to treat the revaluation surplus as being realized on disposal of the assets.depreciation is on bldgs is on straight line over 50 years.
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this calculation is simple:
………………………………..LAND………………BLDG
COST=………………………….90…………………….750
ACCUM. DEP……………….0………………………(120)
CV=……………………………..90………………………630
DEP FOR THE YR ………..0……………………….(15)
CV…………………………………90……………………..615 (total=705)
REVAL=……………………….10……………………..45
FINAL YE END …………….100…………………..655but i can write the journal entry for it.
Dr. cost
Dr. accum. dep========135
Cr. Reval Surplus =====this amt is (reval amt – cv)=760-705=55so, rewriting it neatly:
dr cost
dr 135
cr 55what amt will go for the cost part??
Your first journal entry is incorrect!
It should be:
Dr Land 10
Dr Acc dep 45
Cr Reval Res 55Ok?
i dont get it Mike.
the accum dep of 45 cr – i dont get.
is the bldg being revalued down??
u will have to explain what is happening.
thanks
When a depreciated asset is revalued upwards, the adjustment is initially against the accumulated depreciation account, not an addition to the asset cost account
In effect, it’s an adjustment to the depreciation that has been charged against the asset in years gone by.
By reducing the depreciation, we are increasing the net book value
In your example, the reduction in the accumulated depreciation brings that balance down to (135 – 45) 90 and the carrying value of the asset will therefore move from (750 – 135) 615 to (750 – 90) 660
That 660 when added to the revalued land of 100 gives us the revalued figure of 760 which is the figure we were aiming for!
OK now?
sir…i read ur answer and i understand AFTER the journal entry of
dr land 10
dr accum. dep 45
cr reval surp 55so, my question is
1. that this entry wd be the first thing u will have to figure out.. if yes then the purely mechanical way is to take the reval figure (revalued amount – cv), and you are given the land appreciation figure therefore value for the accumulated dep will be the simply the balancing figure. correct?
2. after the journal entry, the value in the original cost T account for land will reflect 100 but the bldg T account will continue to show 750. correct?
3. if #1 is correct, this is very very interesting becuase just to see the accumulated depreciation account next to land account which is never depreciated was to say the least a bit crazy at first..:)
4. just to reiterate, you have to figure out the journal entry FIRST and the way to do that is as i desribed in #1?
i dont mind saying that this question has truly been humbling
hi sir,
if an asset held for sale being sold which had revaluation reserve amount previously,what adjustments are needed for the revaluation reserve account?
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