The following data from Lyre Ltd\'s accounts relates to two assets at 30 June 20

Question

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

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 $2,238,000 and plant and equipment has a fair value of $215,000. On 30 June 2019 Lyre Ltd reviews the value of its assets. The fair value of land is reassessed as $2,278,000. 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.

Asset Value Accumulated
depreciation Carrying amount Land $2,350,000 0 $2,350,000 Plant and equipment $220,000 $44,000 $176,000

Explanation / Answer

As on 30th june 2018

Profit&Loss a/c dr. 112000

to Land a/c(2350000-2238000) 112000 (Note 1)

(Being land revalued)

Plant&Equipment a/c Dr.(215000-176000) 39000

To Revaluation reserves 39000 (note 2)

(Being plant eqipment revalued)

Subsequent revaluation:

Land a/c dr.(2278000-2238000) 48000

To profit&loss a/c 48000 (Note 3)

(being land uppervalued)

Depreciation a/c Dr(215000*20%) 43000

To Plant&Equipment 43000

(Being depreciation foryear 2019)

Revaluation reserveA/c Dr.(215000-176000)*20% 7800

To Depreciation 7800 (Note 4)

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

Notes

1)If any Fixed asset has been downwrd revaulued ,the entire loss due to revaluation has to be writeoff to Profit and loss account

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

3)when again Land is subsequently revalued upward then the upto amount previously debited,now amount has to be credited to profit&loss a/c and tdue to revalution amounhe 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 doesnot reconise the upward revaluation of asset in books due to the capital gains tax.

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