PPE: Revalution model

Question 1

Depreciation Fair value

Answer 1

Fair value
- Acc dep
- Acc impairment losses

Question 2

Revaluation surplus

Answer 2

Excess from increase asset’s CA to FV
- [OCI]

Question 3

Revaluation expense

Answer 3

Revualte asset above depreciated cost which is expensed in [P/L]

Question 4

Why is revaluation expense expensed to P/L

Answer 4

It creates artificial decrease in the profit
- that’s why P/L is accumulated in retained earnings to offset artificial decrease

Question 5

Carrying amount increase

Answer 5

Recognised as a revaluation income

Question 6

Reverse a previous revaluation decrease

Answer 6

Debit Carrying amount
Credit Revaluation surplus [OCI]

Question 7

Carrying amount decrease

Answer 7

• First undo any Revaulation surplus
  therefore:
  Credit Carrying amount
  Debit Revaultion surplus
  Once surplus is zero then any decrease is a revaluation expense
  Credit Carrying amount
  debit Revaluation expense

Question 8

Carrying amount decrease as one journal entry

Answer 8

Credit Carrying amount
debit revulation surplus
Debit revalution expense

Question 9

Transfer surplus to retained earnings

Answer 9

Debit Revaluation surplus
Credit retained earnings
(surplus/ remaining years)

Question 10

Methods of accounting for revaluation

Answer 10

Gross replacement method
Net replacement method

Question 11

Gross replacement value

Answer 11

re-estimated original economic benefits that was shown on the date of purchase

Question 12

Proportionately restatement

Answer 12

Restating AD account to reflet AD on the gross replacement method

Question 13

GRV

Answer 13

fair value / remaining years * useful life
Debit PPE: GRV - Cost
Credit PPE: Acc dep (GRV- RV)/useful life * remaining life- (Acc dep)
Credit Revalution surplus FV-CA or balnce