• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Tangible non-current asset

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Tangible non-current asset

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 24, 2021 at 10:11 am #638966
    advus
    Member
    • Topics: 14
    • Replies: 17
    • ☆

    Dear Tutor:
    Banter Co purchased an office building on 1 January 20X1.The building cost was $1,600,000and this was depreciated by the straight line method at 2% per year, assuming a 50-yearlife and nil residual value. The building was revalued to $2,250,000 on 1 January 20X6.Theuseful life was not revised.The excess depreciation charge will be transferred from the revaluation surplus to retained earnings each year. The company’s financial year ends on31 December.
    What is the balance on the revaluation surplus at 31 December 20X6?

    The revaluation surplus is (2250000-1600000)+1600000*2%*5-18000=792000,I can’t understand why it plus the accumulate depreciation($160000)?

    October 24, 2021 at 2:55 pm #638995
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51563
    • ☆☆☆☆☆

    Although $792,000 is the correct answer, the workings you have typed ate not correct (and do not arrive at 792,000 anyway 🙂 )

    The NPV at the date of the revaluation is 1,600 – (5 x 2% x 1,600) = $1,440.
    It is revalued to $2,250, giving a surplus of $810 at the date of revaluation.

    The depreciation for one year on the revalued amount is 2,250/45 = $50.
    The depreciation on the original cost was 2% x 1,600 = $32.

    Therefore the excess depreciation is the difference of $18, and therefore the revaluation surplus at 31 December 20X6 is 810 -18 = $792.

    October 24, 2021 at 4:59 pm #639014
    advus
    Member
    • Topics: 14
    • Replies: 17
    • ☆

    And there is another question:
    Company J’s head office building had a carrying amount of $400,000 at 1 January 20X4and 30 years useful life remaining. It was revalued on that date to $600,000 with no change to the useful life.
    On 1 January 20X6, following a property slump, it was sold for $450,000.
    What amount (if any) should be charged against profit or loss as loss on disposal?
    $150,000
    $110,000
    $50,000
    $Nil
    why it is nil?
    Thank you for your answer,tutor.

    October 25, 2021 at 8:27 am #639042
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51563
    • ☆☆☆☆☆

    This is not really relevant until Paper FR (not for Paper FA).

    However when the asset is sold, profit or loss is calculated based on the carrying value if it had not been revalued. Here is was sold for more than the carrying value had it not been revalued and so there is no loss. The balance on the revaluation reserve is then transferred to retained earnings.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • Amalsudheesh on FA Chapter 6 Questions Depreciation
  • Ravendra Arjune on FA Chapter 22 Questions Group Accounts The Consolidated Statement of Financial Position (1)
  • Ken Garrett on The Nature of Performance Management – ACCA Advanced Performance Management (APM)
  • Mustafy on Objective of financial reporting – ACCA Financial Reporting (FR)
  • John Moffat on IAS 16 Property, Plant and Equipment – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy