Page 127 - F3 -FA Integrated Workbook STUDENT 2018-19

Non-current assets: disposal and revaluation

Example 5

Disposal of a revalued asset

Continuing with the scenario from Examples 3 and 4, Platinum has now sold
the building for $350,000, having owned it for forty years. At the date of
disposal, the accumulated depreciation provision was $150,000 ($15,000 ×
10 years).

Required:

Calculate the profit or loss arising on disposal of the building, along
with the transfer within equity upon disposal of the building.

Building disposal

Details $ Details $
Building asset 300,000 Acc Dep’n 150,000

Profit or loss ß 200,000 Cash 350,000
–––––– ––––––

500,000 500,000
–––––– ––––––

Calculation of amount remaining within revaluation surpus at date of disposal:

$

Balance on revaluation surplus at revaluation date: 220,000
Less: annual excess depreciation transfer (110,000)

$11,000 × 10 years
––––––

Balance on revaluation surplus at disposal date: 110,000
––––––

Accounting entries:

Debit $ Credit $
Revaluation surplus 110,000 Retained earnings 110,000

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