Lex plc. is a manufacturer located in the Midlands operating in the textiles industry. The company decided to revalue its buildings on 1 January 2019 to their market value. On 1 January 2019, prior to the revaluation exercise, the carrying amount of buildings corresponded to their original cost of £4m less accumulated depreciation of £0.4m. The fair value of buildings at the date of revaluation was confirmed to be £4.5m with an estimated remaining life of 18 years at that date. As at 31 December 2020, due to the economic impact of the COVID-19 pandemic, the fair value of Lex plc.'s buildings decreased to £3m. No depreciation has yet been charged on non-current assets for the years ended 31 December 2019 and 31 December 2020. Lex opted to transfer any balances in the revaluation surplus account to retained earnings only when the asset is derecognised. Required: Explain the accounting treatment for the transactions above for the years ended 31 December 2019 and 31 December 2020. In your answer, clearly indicate where in the financial statements the relevant balances will be shown at the end of each fiscal year.
Lex plc. is a manufacturer located in the Midlands operating in the textiles industry. The company decided to revalue its buildings on 1 January 2019 to their market value. On 1 January 2019, prior to the revaluation exercise, the carrying amount of buildings corresponded to their original cost of £4m less accumulated depreciation of £0.4m. The fair value of buildings at the date of revaluation was confirmed to be £4.5m with an estimated remaining life of 18 years at that date. As at 31 December 2020, due to the economic impact of the COVID-19 pandemic, the fair value of Lex plc.'s buildings decreased to £3m. No depreciation has yet been charged on non-current assets for the years ended 31 December 2019 and 31 December 2020. Lex opted to transfer any balances in the revaluation surplus account to retained earnings only when the asset is derecognised. Required: Explain the accounting treatment for the transactions above for the years ended 31 December 2019 and 31 December 2020. In your answer, clearly indicate where in the financial statements the relevant balances will be shown at the end of each fiscal year.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Lex plc. is a manufacturer located in the Midlands operating in the textiles industry. The company decided to revalue its buildings on 1 January 2019 to their market value. On 1 January 2019, prior to the revaluation exercise, the carrying amount of buildings corresponded to their original cost of £4m less accumulated
Required:
- Explain the accounting treatment for the transactions above for the years ended 31 December 2019 and 31 December 2020. In your answer, clearly indicate where in the financial statements the relevant balances will be shown at the end of each fiscal year.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1 Calculation of Revaluation Gain or loss
VIEWStep 2 Accounting Treatment of Revaluation Gain and Depreciation for the year 2019
VIEWStep 3 Treatment in Financial statements of the year ended 31st December, 2019
VIEWStep 4 Calculation of Revaluation loss
VIEWStep 5 Accounting Treatment of Revaluation Loss and Depreciation for the year 2020
VIEWStep 6 Treatment in Financial statements of the year ended 31st December, 2020
VIEW
Step by step
Solved in 6 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education