Brix Co owns a building which it uses as its office, warehouse and garage. The land is carried as a separate non-current tangible asset in the statement of financial position. Brix Co has a policy of regularly revaluing its tangible non-current assets. The original cost of the building on 1 January 2006 was $2.1 million, and at that date it was estimated to have a useful economic life of 20 years, with no residual value. The company adopted the revaluation model of IAS 16 in 2012 and the building was valued at subsequent valuations as follows: 31 December 2012 $2.6 million 31 December 2015 $2.4million At each revaluation date the remaining useful life remains unchanged. Brix Co also owns a brand name, which it acquired 1 January 2014 for $1 million. The brand name is being amortised over 10 years and has a carrying amount at 31 December 2015 of $800,000. A brand specialist valued Miami's brand name at market value of $780,000 on the same date and Miami's chief accountant calculated that the brand name's value in use on this date was $750,000. 1. Assuming that Brix Co makes a transfer from the revaluation reserve to retained earnings in respect of the depreciation of revalued properties, how much would this transfer be in the year ended 31 December 2015? A $40,000 B $95,000 C $135,000 D $200,000 2. Assuming that Brix Co does not make a transfer from the revaluation reserve to retained earnings in respect of revalued properties, at what amount is the revaluation reserve reported at 31 December 2015? A $1,035,000 B $1,235,000 C $1,425,000 D $1,635,000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Brix Co owns a building which it uses as its office, warehouse and garage. The land is carried as a separate non-current tangible asset in the statement of financial position.
Brix Co has a policy of regularly revaluing its tangible non-current assets. The original cost of the building on 1 January 2006 was $2.1 million, and at that date it was estimated to have a useful economic life of 20 years, with no residual value. The company adopted the revaluation model of IAS 16 in 2012 and the building was valued at subsequent valuations as follows:
31 December 2012 $2.6 million 31 December 2015 $2.4million
At each revaluation date the remaining useful life remains unchanged.
Brix Co also owns a brand name, which it acquired 1 January 2014 for $1 million. The brand name is being amortised over 10 years and has a carrying amount at 31 December 2015 of $800,000. A brand specialist valued Miami's brand name at market value of $780,000 on the same date and Miami's chief accountant calculated that the brand name's value in use on this date was $750,000.
1. Assuming that Brix Co makes a transfer from the revaluation reserve to
A $40,000 B $95,000 C $135,000 D $200,000
2. Assuming that Brix Co does not make a transfer from the revaluation reserve to retained earnings in respect of revalued properties, at what amount is the revaluation reserve reported at 31 December 2015?
A $1,035,000 B $1,235,000 C $1,425,000 D $1,635,000
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