Acca financial Accounting (FA) Study Text ac ca (FA)

 

 

Solution to Illustration 3 

 

Statement of profit or loss and other comprehensive income: 

Other comprehensive income: 

Items that will not be reclassified to profit or loss in future periods: 

Revaluation surplus on property in the year $750,000 

Statement of financial position: 

On revaluation at start of 20X6 

Dr Non-current asset – retail unit $700,000 

Dr Accumulated depreciation $50,000 

Cr Revaluation surplus $750,000 

Depreciation for 20X6 

Dr Depreciation expense ($800,000/25 yrs) $32,000 

Cr Accumulated depreciation $32,000 

Transfer of excess depreciation within equity for 20X6 

Dr Revaluation surplus ($32,000 – $2,000) $30,000 

Cr Retained earnings $30,000 

Tutorial note: excess depreciation is the difference between the post-

revaluation depreciation charge of $32,000 and the depreciation charge 

based upon original cost of $2,000.