11. Non Current Assets: Disposal and Revaluation

Question 1

Loss on disposal

Answer 1

If proceeds received on disposal are less than the carrying value the difference is a loss on disposal
(treated as an expense)

Question 2

Profit on disposal

Answer 2

If proceeds received on disposal are higher than the carrying value the difference is a profit on disposal
(treated as income)

Question 3

Accounting for disposal step 1

Answer 3

remove the cost from the books and transfer to disposal account
DR disposal account
CR non current asset cost account

Question 4

Accounting for disposal step 2

Answer 4

remove the accumulative depreciation from the books and transfer to the disposal account
DR accumulative disposal account
CR disposal account

Question 5

Accounting for disposal step 3

Answer 5

record the cash proceeds
DR cash account
CR disposal account

Question 6

Disposal through part exchange (PEA)

Answer 6

Steps 1 & 2 same as disposal process
Step 3 record the part exchange
DR non current asset cost account
CR Disposal account

Step 4 record the cash proceeds (if any)
DR non current asset cost account
CR cash payable

Question 7

Non current asset register

Answer 7

includes;
location of each asset
use
repairs and cost of repairs
expiry dates of licenses
date of purchase
name and address of asset supplier
cost of asset
estimated residual value
description of asset
code number of asset
method of depreciation
accumulated depreciation of the asset
details of disposal

Question 8

Revaluation of tangible assets

Answer 8

the fair value of assets is usually the market value

Question 9

revaluation reserve

Answer 9

If an asset is revalued, any accumulated depreciation at the time of revaluation should be written off to the revaluation reserve account.

This appears in the capital section of the SFP

Depreciation is then recalculated on the revalued amount for the rest of its useful life

Question 10

Steps to account for a revaluation step 1

Answer 10

restate the asset cost and transfer increase to revaluation reserve

Question 11

Steps to account for a revaluation step 2

Answer 11

remove accumulated depreciation at revaluation date and transfer to revaluation reserve account

Question 12

Steps to account for a revaluation step 3

Answer 12

recalculate the current years depreciation on revalued amount

Question 13

Impairment of tangible assets

Answer 13

maybe impaired if the recoverable amount if less than the carrying value

Question 14

Recoverable amount

Answer 14

is the higher of
fair value - selling costs
value in use

Question 15

Accounting for impairment

Answer 15

DR statement of profit or loss expense account

CR non current asset cost account