Page 175 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

NNon-curreent assets – Acquisition, Depreciiation annd Subseequent
Recoggnition

Exxampple 5

Lannd was purrchased at a cost of $$30,000. Itt was subsequently rerevalued too:

Yeaar 1 $40,0000
Yeaar 2 $33,0000
Yeaar 3 $24,0000
Shoow how eaach of thee gains or losses wiill be recorded withiin the
revvaluation rreserve orr the statement of pprofit or losss

Sollution

Yeaar 1

Thee asset hass increased in value from $30,0000 to $40,000.
Dr AAsset $10,0000
Cr Revaluatioon Reservee $10,0000.

Yeaar 2

Thee asset hass decreaseed in valuee from $40,,000 to $333,000. Thiss decreasee
cann be chargeed againstt the revaluuation reseerve because the reseerve alreaddy
hass $10,000 iin it from yyear 1 for thhat particular asset.

Dr Revaluatioon Reservee $7,0000
Cr AAsset $7,0000

Yeaar 3

Thee asset hass decreaseed in valuee from $33,,000 to $244,000. Thee decreasee
cannnot all be charged against the revaluatioon reserve because thhere is only
$3,000 left aftter year 2 ffor that particular assset. The reeserve is reeduced to nnil
andd then the balance off the decreease is chaarged againnst profits iin the
stattement of pprofit or losss.
Dr Revaluatioon Reservee $3,0000
Dr SStatementt of profit or loss $6,0000
Cr AAsset $9,0000

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