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Dear Sir,
Can you please explain the answer to me
At 31 Dec 2013 a limited liability company, owned a building that had cost $800.000 on 1 Jan 2014.
It was depreciated at 2% per year.On 31 Dec 2013 a revaluation to $1.000.000 was recognised. At this date the building had a remaining useful life of 40 years.
What is the balance on the revaluation surplus at 31 Dec 2013 and the depreciation charge in the SOPL for the year ended 31 Dec 2014?
The Answer is:
depreciation charge for year ended 31 Dec 2014: $25 000
Revaluation surplus as at 31 Dec 2013: $360 000I understand the depreciation charge, but I do not understend how revaluation surplus is 360 000.
Kaplan answer for revaluation surplus is: 1.000.000 – (800.000 – (800.000 x 2% x 10)) = 360.000
Either you have mistyped the question, or there is a typing error in Kaplan. The assets cannot have been bought on 1 January 2014, otherwise it would not have been owned on 31 December 2013 🙂
The question should say that the asset had been bought on 1 January 2004.The revaluation surplus is the difference between the new value and the carrying value / net book value (i.e. cost less accumulated depreciation).
The asset that has been revalued had a cost of $800,000 and had been depreciated for 10 years, so total depreciation of (800,000 x 2% x 10).
Have you watched my free lectures on non-current assets where revaluations are explained?
Yes i have, they helped me a lot. It make sense that it is 2004 instead 2014, I understand it now. Have a nice day and thank you
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