Question

The following data from Lyre Ltd's accounts relates to two assets at 30 June 2018:

Asset		Value		Accumulated depreciation		Carrying amount
Land		$2,100,000		0		$2,100,000
Plant and equipment		$300,000		$60,000		$240,000

At 30 June 2018 Lyre Ltd decides to adopt the revaluation model for both these assets. On this date land has a fair value of $2,018,000 and plant and equipment has a fair value of $294,000. On 30 June 2019 Lyre Ltd reviews the value of its assets. The fair value of land is reassessed as $2,080,000. Plant and equipment has no change in value on that date.

Prepare the journal entries required to revalue the assets for the year ended 30 June 2018 and the 30 June 2019.

Answer 1

Answer:

As on 30th June 2018

1

Profit&Loss

82000

Land (2100000-2018000)

82000 (note 1)

(Being land revalued)

2

Plant & Equipment (294000-240000)

54000

Revaluation reserves

50000 (note 2)

(Being plant equipment revalued)

3

Subsequent revaluation:

Land (2080000-2018000)

62000

Profit&loss

62000 (Note 3)

(being land upper valued)

4

Depreciation (294000*20%)

58800

Plant&Equipment

58800

(Being depreciation for year 2019)

5

Revaluation reserve (294000-240000)*20%

10800

Depreciation

10800 (Note 4)

(Being depreciation to the extent on revalued amount has adjusted with revaluation reserve)

Notes

1)If any Fixed asset has been downward revalued ,the entire loss due to revaluation has to be write off to Profit and loss account

2)When the Revaluation is upward then the gain due to it has to be transferred to Revaluation reserve account which is treated as Capital reserve

3)when again Land is subsequently revalued upward then the up to amount previously debited,now amount has to be credited to profit&loss a/c and due to revaluation amount remaining to revaluation reserve

4)During 2019,Depreciation due to revaluation has to be adjusted with revaluation reserve(if any)

5)some of the entities does not recognize the upward revaluation of asset in books due to the capital gains tax.