Holooly Plus Logo
Holooly Plus Logo

Question 9.6.8: disposal of a revalued asset Returning to the case of the re...

disposal of a revalued asset

Returning to the case of the revalued asset in Section 5, suppose that two years after the revaluation to $150,000, the land and building are sold for $200,000. (Assume that the entity does not transfer the excess depreciation from the revaluation surplus to retained earnings). What is the profit on disposal?

The blue check mark means that this solution has been answered and checked by an expert. This guarantees that the final answer is accurate.
Learn more on how we answer questions.

BUILDING – COST
$ $
Balance b/d 75,000 Disposal account 75,000

BUILDING – ACCUMULATED DEPRECIATION
$ $
Disposal account 6,000 Balance b/d ($3,000 × 2) 6,000

 

 

LAND – COST
$ $
Balance b/d 75,000 Disposal account 75,000

REVALUATION SURPLUS
$ $
Disposal account 105,000 Balance b/d 105,000

 

DISPOSAL ACCOUNT
$ $
Building – cost 75,000 Cash 200,000
Land – cost 75,000 Building – acc dep’n 6,000
I & E a/c (profit on disposal) 161,000 Revaluation surplus 105,000
311,000 311,000
Ignoring the revaluation:
$
Original cost of building 30,000
Original cost of land 20,000
50,000
Depreciation ($5,000 + $6,000) (11,000)
Carrying amount 39,000
Sale proceeds 200,000
Profit on sale 161,000

Related Answered Questions

Question: 4.17

Brian Box prospers in his computer software business, and before long he purchases a car for himself, and later for his chief assistant Bill Ockhead. Relevant data is as follows ...

Verified Answer:

(a) (i) Brian Box car            Annual depreciati...
Question: 6.7

Exchange or part exchange of assets occurs frequently for items of property, plant and equipment. IAS 16 states that the cost of an item obtained through (part) exchange is the fair value of the asset received (unless this cannot be measured reliably) Taking the example above assume that, instead ...

Verified Answer:

Question: 6.6

A business includes $110,000 worth of machinery at cost in its accounts. Its policy is to make a provision for depreciation at 20% per annum straight line. The total provision now stands at $70,000. The business sells for $19,000 a machine which it purchased exactly two years ago for $30,000. ...

Verified Answer:

Question: 6.3

A business purchased a non-current asset on 1 January 20X1 for $25,000. It had an estimated life of six years and an estimated residual value of $7,000. The asset was eventually sold after three years on 1 January 20X4 to another trader who paid $17,500 for it. ...

Verified Answer:

Annual depreciatio = Annual depreciatio = \...
Question: 5.1

When Ira Vann commenced trading as a car hire dealer on 1 January 20X1, he purchased business premises at a cost of $50,000. For the purpose of accounting for depreciation, he decided the following. (a) The land part of the business premises was worth $20,000; this would not be depreciated. (b) The ...

Verified Answer:

(a) Before the revaluation, the annual depreciatio...
Question: 6.4

Disposal of a non-current asset A business purchased a machine on 1 July 20X1 at a cost of $35,000. The machine had an estimated residual value of $3,000 and a life of eight years. The machine was sold for $18,600 on 31 December 20X4, the last day of the accounting year of the business. ...

Verified Answer:

Annual depreciation \frac{\$\left(35,000-3...
Question: 4.12

Jakob Co purchased an asset for $100,000 on 1.1.X1. It had an estimated useful life of 5 years and it was depreciated using the reducing balance method at a rate of 40%. On 1.1.X3 it was decided to change the method to straight line. ...

Verified Answer:

Depreciation Aggregate Year charge  depreciatio...
Question: 4.9

A business which has an accounting year which runs from 1 January to 31 December purchases a new non-current asset on 1 April 20X1, at a cost of $24,000. The expected life of the asset is 4 years, and its residual value is nil. What should be the depreciation charge for 20X1? ...

Verified Answer:

The annual depreciation charge will be \fr...
Question: 9.Q6

The following list of account balances was extracted from the ledger of Kevin Webster, a sole trader, as at 31 May 20X1, the end of his financial year. KEVIN WEBSTER TRIAL BALANCE AS AT 31 MAY 20X1 Dr Cr $ $ Property, at cost 120,000 Equipment, at cost 80,000 Accumulated depreciation (as at 1 June ...

Verified Answer:

KEVIN WEBSTER INCOME STATEMENT FOR THE YEAR EN...
Question: 9.Q4

A business purchased two rivet-making machines on 1 January 20X5 at a cost of $15,000 each. Each had an estimated life of five years and a nil residual value. The straight line method of depreciation is used. Owing to an unforeseen slump in market demand for rivets, the business decided to reduce ...

Verified Answer:

 MACHINERY  ACCOUNT $ $ 20X7 20X7 1 ...