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 Revaluation surplus journal entry?
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kashif187
Unregistered Trainee

1 Posts

Posted - Oct 28 2009 :  12:07:22 PM  Show Profile
Corvette the leading car manufacturing company acquired a machine for Rs.125,000 on Jan 1, 2004: estimated life was 8 years. Depreciation is charged on straight line method. On Jan 1, 2009: the machine was revalued at Rs.70,000.Apart from recording revaluation entry, no other entries have been passed

Required: Calculate the value of depreciation expense and pass journal entry in accordance with IAS-16

Calculate the value of revaluation surplus and pass journal entry in accordance with IAS-16

hmmm
Junior

Pakistan
101 Posts

Posted - Oct 28 2009 :  7:35:35 PM  Show Profile
125000/8=15625 depreciation per year
depreciation for 3 years = 15625*3=46875

WDV after 3 years = 125000-46875 = 78125
revalued value = 70000

difference = 78125 - 70000 = 8125
8125 should be charged to p&l a/c if it is first time revalued no revaluation surpluse account already exist.
firstly charged the accumulated depreciation to asset
dr acumulated dep
cr asset


now
dr p&l a/c
cr asset


closing balance of the asset should be 70000
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skystar
Unregistered Trainee

Pakistan
22 Posts

Posted - Oct 29 2009 :  9:47:06 PM  Show Profile  Visit skystar's Homepage  Send skystar an AOL message
quote:
Originally posted by kashif187

Corvette the leading car manufacturing company acquired a machine for Rs.125,000 on Jan 1, 2004: estimated life was 8 years. Depreciation is charged on straight line method. On Jan 1, 2009: the machine was revalued at Rs.70,000.Apart from recording revaluation entry, no other entries have been passed

Required: Calculate the value of depreciation expense and pass journal entry in accordance with IAS-16

Calculate the value of revaluation surplus and pass journal entry in accordance with IAS-16

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skystar
Unregistered Trainee

Pakistan
22 Posts

Posted - Oct 29 2009 :  10:05:05 PM  Show Profile  Visit skystar's Homepage  Send skystar an AOL message
quote:
Originally posted by kashif187

Corvette the leading car manufacturing company acquired a machine for Rs.125,000 on Jan 1, 2004: estimated life was 8 years. Depreciation is charged on straight line method. On Jan 1, 2009: the machine was revalued at Rs.70,000.Apart from recording revaluation entry, no other entries have been passed

Required: Calculate the value of depreciation expense and pass journal entry in accordance with IAS-16

Calculate the value of revaluation surplus and pass journal entry in accordance with IAS-16

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farazkpmg
Unregistered Trainee

Pakistan
10 Posts

Posted - Oct 30 2009 :  1:47:30 PM  Show Profile  Send farazkpmg a Yahoo! Message
Boss its of 6 year not for 3 year working...
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hmmm
Junior

Pakistan
101 Posts

Posted - Nov 01 2009 :  2:57:08 PM  Show Profile
ok big boss. u can also solve
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Arabian
Unregistered Trainee

Pakistan
20 Posts

Posted - Nov 03 2009 :  2:39:19 PM  Show Profile  Visit Arabian's Homepage
125000/8=15625 depreciation per year
depreciation for 5 years = 15625*5=78125

WDV after 3 years = 125000-78125 = 46875
revalued value = 70000

difference = 70000-46875 = 23125

Asset 23125 Dr.
Revaluation surplus 23125 Cr.

Edited by - Arabian on Nov 03 2009 2:40:50 PM
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hmmm
Junior

Pakistan
101 Posts

Posted - Nov 04 2009 :  5:53:13 PM  Show Profile
revaluation surpluls at the end will be transferred to retained earing
what will be the effect of deferred tax?
tax base of revaluation surplus is zero.
deferred tax asset created for the diffirence. I have read the book of Kamran but that is confusing. can anyone explian it in detail?
mean what entry will be pass for deferred tax
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irfan kazim
Junior

Pakistan
94 Posts

Posted - Nov 12 2009 :  11:47:20 AM  Show Profile
You are all boss.
Working. 125000/8=15625
previous 5 year depreciation= 15625*5=78125
WBV 125000-78125= 46875 Revaluation surplus 70000-46875=23125
Journal entry at the first date of Jan 2009
Accumulated depreciation a/c 78125
Assets a/c 78125
At the year end
Depreciation a/c 23333
accumulated depreciation 23333
workings 70000/3=23333
Revaluation surplus
Assets a/c 23125
Revaluation surplus 23125

Excess depreciation due to revaluation adjusted
revaluation a/c 7708
retained earnings 7708
workings 23125/3=7708 or 23333-15625= 7708
Excess amount of depreciation is transfered to retained earning account instead whole revaluation surplus amount will be transfered to retained earning account.
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