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Financial Accounting II (MGT401)
Topic: "Property, Plant and Equipment (IAS-16)

Learning Objectives: Students will be able to learn the basic principles of revaluation as per IAS 16 on Property, Plant and Equipment.

Scenario:

HXN Ltd. - a textile manufacturing firm located in Karachi has the policy to recognize its fixed assets (tangible) initially at cost and subsequently at cost less accumulated depreciation and impairment losses. Depreciation on the fixed assets is charged appropriately to write off the cost over estimated useful life of the assets.

In the financial year 2013-14, the company decided to revalue its plant assets. The data regarding this revaluation is as follows:

 

Gross Carrying Amount (Rs.)

Accumulated Depreciation (Rs.)

Net Carrying Amount (Rs.)

Revalued Amount (Rs.)

Plant

7,460,000

230,000

7,230,000

9,950,000

Machinery

2,350,000

440,000

1,910,000

3,050,000

Requirement:

Determine the revalued gross carrying amountrevalued accumulated depreciationrevalued net carrying amount and revaluation surplus supporting necessary workings, where necessary.

 

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Sloution:

 

Calculation For Plant:

Revalued gross carrying amount = Gross Carrying Amount* Revalued Amount/Net Carrying                                          

                                                        Amount

                                                     = 7460000 * 9950000 / 7230000

                                                     = 10266528.35

Revalued Accumulated Depreciation = Accumulated depreciation* Revalued Amount/Net

                                                              Carrying Amount

                                                           = 230000 * 9950000 / 7230000

                                                           = 316528.35

Revalued net carrying Amount = Revalued gross carrying amount - Revalued Accumulated  

                                                      Depreciation

                                                  = 10266528.35 – 316528.35

                                                  = 9950000

Revaluation surplus = Revalued net carrying amount – Old Net Carrying Amount

                                   = 9950000 – 7230000

                                   =2720000           

 

Calculation For Machinery:

Revalued gross carrying amount = Gross Carrying Amount* Revalued Amount/Net Carrying                                          

                                                        Amount

                                                     = 2350000 * 3050000 / 1910000

                                                     = 3752617.8

Accumulated depreciation           = Accumulated depreciation* Revalued Amount/Net

                                                        Carrying Amount

                                                     = 440000 * 3050000 / 1910000

                                                     = 702617.8

Revalued net carrying amount     = Revalued gross carrying amount - Revalued Accumulated  

                                                        Depreciation

                                                     = 3752617.8 – 702617.8

                                                     = 3050000

Revaluation surplus = Revalued net carrying amount – Old Net Carrying Amount

                                   =3050000 – 2350000

                                   =700000

 Tell Me If i am Wrong 

lukman:
apne surplus ka ye farmula kha se liya?
Example - 01
• Cost and Accumulated Depreciation of the asset before revaluation:
Cost of Asset/Gross carrying Amount Rs. 500,000
Accumulated Depreciation Rs. 200,000
Carrying amount Rs. 300,000
• The asset is revalued at Rs. 450,000
• Suppose depreciation is charged at 20 % on written down value.
Solution:
• The depreciation charge on old carrying amount would have been Rs. 60,000/-
• On the revalued amount depreciation would be Rs. 90,000/-.
• The difference of Rs. 30,000/- would be transferred from revaluation surplus to retained earnings.
this example is given in lecture no 6.so according to this surplus will be caculted like this

Revalued surplus = revalued depreciation-accumulated depreciation
= Rs.316528- Rs.230000
Revalued surplus = Rs.86528

Attachments:

Estimations

Attachments:

Revalued gross carrying amount:

Gross Carrying Amount*Revalued Amount/Net Carrying Amount
Accumulated depreciation:

Accumulated Depreciation * Revalued Amount/ Net Carrying Amount

Revalued net carrying amount= Revalued gross carrying amount- Accumulated Depreciation 
Revaluation surplus:
Depreciation on old carrying cost –depreciation on revalued amount

For plant:

Revalued gross carrying amount:

Gross Carrying Amount*Revalued Amount/Net Carrying Amount

= 7460000 * 9950000 / 7230000
= 10266528.35
Accumulated depreciation:

Accumulated Depreciation * Revalued Amount/ Net Carrying Amount

= 230000 * 9950000 / 7230000
= 31652.835
Revalued net carrying amount:

Revalued gross carrying amount- Accumulated Depreciation

= 10266528.35 – 31652.835
= 950000

For Machinery:

Revalued gross carrying amount:

Gross Carrying Amount*Revalued Amount/Net Carrying Amount

= 2350000 * 3050000 / 1910000
= 3752617.8

Accumulated depreciation:

Accumulated Depreciation * Revalued Amount/ Net Carrying Amount
= 440000 * 3050000 / 1910000
= 702617.8
Revalued net carrying amount:

Revalued gross carrying amount- Accumulated Depreciation

= 3752617.8 – 702617.8
= 3050000
Note:
Revaluation surplus can not be calculated because percentage of depreciation under written down value is no given

depreciation percentage is not given

so

for plant

Revaluation surplus = Revalued net carrying amount – Old Net Carrying Amount

                                   = 9950000 – 7230000

                                   =2720000 

for machinery

Revaluation surplus = Revalued net carrying amount – Old Net Carrying Amount

3050000-1910000 = 1140000

FOR PLANT

Calculation for Revalued Gross Carrying Amount

Revalued gross carrying amount                        =          7460000 * 9950000 / 7230000

Revalued gross carrying amount                        =          10266528.35

Calculation for Revalued Accumulated Depreciation

Revalued accumulated depreciation       =          230000 * 9950000 / 7230000

Revalued accumulated depreciation       =          316528.35

Calculation for Revalued Net Carrying Amount

Revalued net carrying amount                =          10266528.35 – 316528.35

Revalued net carrying amount                =          9950000.00

Calculation for Revaluation Surplus

Revaluation Surplus                               =          Revalued net carrying amount – Old net carrying amount

Revaluation Surplus                               =          9950000.00 – 7230000

Revaluation Surplus                               =          2720000.00

 

FOR MACHINERY

Calculation for Revalued Gross Carrying Amount

Revalued gross carrying amount                        =          2350000 * 3050000 / 1910000

Revalued gross carrying amount                        =          3752617.80

Calculation for Revalued Accumulated Depreciation

Revalued accumulated depreciation       =          440000 * 3050000 / 1910000

Revalued accumulated depreciation       =          702617.80

Calculation for Revalued Net Carrying Amount

Revalued net carrying amount                =          3752617.80– 702617.80

Revalued net carrying amount                =          3050000.00

Calculation for Revaluation Surplus

Revaluation Surplus                               =          Revalued net carrying amount – Old net carrying amount

Revaluation Surplus                               =          3050000.00 – 1910000.000

 

Revaluation Surplus                               =          1140000.000

wrong

t0 sai kea h phr??????

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