Question

Topic-Revaluation of Intangible Assets:

The following information on Delta Lts is available.

	Sh.
Cost of production quotas (purchased 1-1-2007)	2,000,000
Accumulated amortization on the 31 -12 2008	400,000
Total useful life	10 years
Financial Year End	31st December

At the beginning of 2009 the production quota were valued at a fair value of Sh.2,400,000 by referring to the active market for production quotas.Ignore taxation implications.

Required:

i) Journal entries to record the above using restatement method (show your workings)

Answer 1

Notes :
1	Revaluation of asset is only allowed under International financing reporting standard.
2	There are two methods to deal with already accumulated depreciation
	1	To adjust the accumulated depreciation by restating the value of an asset
	2	By eliminating the accumulated depreciation
3	If there is gain in revaluation, credit it to Revaluation Suplus under Other Comprehensive
	Income under shareholder's equity. And if there is loss debit it to Income statement.
Date	General Journal		Debit	Credit
			Amount in $	Amount in $
January 1, 2009	Cost of production quota		800000
		Revaluation Surplus		800000
	To record the revaluation of cost of production quota
Note :	Here, I am assuming that accumulated amortization account is there &
	It will continue after revaluation of the asset and hence I have adjusted
	the value of an asset by amount which has increased due to fair value
	adjustment and by accumulated depreciation. Our partial balance sheet
	will look this after above journal entry.
	Partial Balance Sheet
	Cost of Production quota		2800000
	Less : Accumulated amortization		-400000
		Total		2400000