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Greetings Sir,
Sorry for bothering you but I have been practicing my depreciation in BPP
I see for some questions, when there is a revaluation, we take the original cost and minus the depreciation, Then we take the new revaluation cost and minus the carrying amount of the original cost..
and then there are questions like this :
A company purchased an asset on 1 January 20X3 at a cost of $1,000,000. It is depreciated over
50 years by the straight line method (nil residual value), with a proportionate charge for depreciation in
the year of acquisition and the year of disposal. At 31 December 20X4 the asset was re-valued to
$1,200,000. There was no change in the expected useful life of the asset.
The asset was sold on 30 June 20X5 for $1,195,000.answer
Annual depreciation was initially $1,000,000/50 years = $20,000.
After revaluation, annual depreciation is $1,200,000/48 years = $25,000.why isnt it like this :
depn for X3 And X4 = 40,000
so 1,000,000 – 40, 000 = 960,000
1,200,000 -960,000 = 1104000 (new revaluation)
then we take 1104000/48 years?
i am so confused,sir
finnick
like this ques sir
At 31 December 20X3 Q, a limited liability company, owned a building that had cost $800,000 on
1 January 20W4.
It was being depreciated at 2% per year.
On 31 December 20X3 a revaluation to $1,000,000 was recognised. At this date the building had a
remaining useful life of 40 years.answwer
Revaluation surplus – (1,000,000 – (800,000 – (800,000 ? 2% ? 10)) = $360,000 — why did they skip this step in the above question?
is it because of the terms? the above question says asset was revalued and this question says a revaluation is recognised.
sorry and thanks for your time-
First question:
When the asset is revalued, the new value is treated as though it is the cost. SO the new value is 1,200,000 and it is this that is then depreciated.
(1,200,00 – 960,000 = 240,000 and this is the revaluation surplus)Second question:
The revaluation surplus is indeed 360,000. However you have not said what the question was asking for 🙂
Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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