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Explain the key aspects of the ‘cost basis’ and ‘revaluation basis’ for non-current assets, and highlight the differences between them.

Explain the key aspects of the ‘cost basis’ and ‘revaluation basis’ for non-current assets, and highlight the differences between them.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Explain the key aspects of the ‘cost basis’ and ‘revaluation basis’ for non-current assets, and highlight the differences between them.

Sanza Limited ("Sanza") follows the revaluation basis for its land, which is classified as part of Property, Plant, and Equipment. Prior to the 30 June 2022 revaluation, the 'Land' account had a balance of $770,000 and the 'Revaluation surplus' account had a balance of $30,000. Sanza also had the following account in its general ledger: 'Revaluation expense'. An appraisal suggested the Land's fair value as at 30 June 2022 was $700,000. Sanza's financial year end balance date is 30 June (ignore GST).
Transcribed Image Text:Sanza Limited ("Sanza") follows the revaluation basis for its land, which is classified as part of Property, Plant, and Equipment. Prior to the 30 June 2022 revaluation, the 'Land' account had a balance of $770,000 and the 'Revaluation surplus' account had a balance of $30,000. Sanza also had the following account in its general ledger: 'Revaluation expense'. An appraisal suggested the Land's fair value as at 30 June 2022 was $700,000. Sanza's financial year end balance date is 30 June (ignore GST).
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