Question

Woyiram is a company engaged in the processing and export of shea butter. Extracts from the balance sheet as at 31/12/2013 shows the following:

PPE:

Land   3000

Building 12000

Depreciation       (3600)

NBV 11400

Additional information

Depreciation on building is provided at 2% per annum on a straight line basis. The building was revalued on 30^th June 2014 at GHS 11,040 and the policy of the company is to incorporate the revaluation into the books of account. There is no change in the remaining useful life of buildings.

Required

Show the income statement and statement of financial position extract as at December 2014 and 2015 respectively.

Answer 1

(Extract of) Income Statement
For the year ended 31st December 2014 and 2015
Particulars	2014	2015
Expenses:
Depreciation on building (2% p.a)	3,600	3,600
Depreciation for additional value	216	432
Revaluation Reserve	1,440

Depreciation on Building (on additional value)
Particulars	Calculation	Amount
Cost of building (excluding land)		12,000
Depreciation as per SLM		3,600
Depreciation rate	3,600/12,000	30%
NBV as on 31/12/2013	12,000 - 3,600	8,400
Depreciation upto June 2014	3,600 x 6/12	1,800
NBV as on 30/06/2014		6,600
Revalued NBV (excluding land)	11,040 - 3,000	8,040
Increase in value	8,000 - 6,600	1,440
Depreciation for additional value for full year	1,440 x 30%	432

Balance Sheet (Extract)
As on December 31, 2014 and 2015
Liabilities	2014	2015	Assets	2014	2015
			Land	3,000	3,000
Revaluation Reserve	1,440	1,440	Building	4,584	552
				(8,400-3,600-216)	(4,584-3,600-432)