Question

Question 1:

In two paragraphs please explain the difference in the accounting treatment for revaluation increments and revaluation decrements. Do you consider that this difference is ‘conceptually sound’?

Question 2:

In a paragraph please explain when should a revaluation increment be included as part of profit or loss?

Question 3:

Kanga Cairns Ltd owns two blocks of beachfront land, acquired in 2015 for the purposes of future residential development. Block A cost $248000 and Block B cost $353500.

Valuations of the blocks are undertaken by an independent valuer on 30 June 2017 and 30 June 2019. The assessed values are:

2017 valuation($)2019 valuation($)

Block A 227250 293950

Block B 374250 341750

REQUIRED

Assuming asset revaluations were undertaken for the land in both 2017 and 2019, provide the journal entries for both years.

Question 4:

Warren Ltd acquires a four-wheel-drive bus on 1 July 2015 for $400000. The bus is expected to have a useful life to Warren Ltd of 7 years, after which time it will be towed out to sea and sunk to make an artificial reef for marine life
(after all oils and solvents have been removed). The straight-line method of depreciation is used.

On 1 July 2017 the bus is revalued to $350000 and its useful life is reassessed: it is expected, at that date, to have a remaining useful life of six years. On 1 July 2018 it is unexpectedly sold for $320000.

REQUIRED

Provide the journal entries to record the revaluation on 1 July 2017 and the subsequent sale on 1 July 2018.

Answer 1

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