On 1 January 2015, RCSB bought a nearby land that RCSB intend to build their office building. RCSB decide to use revaluation model. The cost of the land is RM2 million. On 1 January 2016, the fair value of the land was RM2.2 million. On 1 January 2016, the value of the land reduced to RM1.9 million as a result of rat infestation. Clearing and cleaning cost amounting to RM1 million as at 31 December 2017. a)Based on the relevant approved accounting standards, journalize each of the transactions that affect RCSB’s financial records for the year ended 31 December 2016 and 31 December 2017.
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.
On 1 January 2015, RCSB bought a nearby land that RCSB intend to build their office building. RCSB decide to use revaluation model. The cost of the land is RM2 million. On 1 January 2016, the fair value of the land was RM2.2 million. On 1 January 2016, the value of the land reduced to RM1.9 million as a result of rat infestation. Clearing and cleaning cost amounting to RM1 million as at 31 December 2017.
a)Based on the relevant approved accounting standards, journalize each of the transactions that affect RCSB’s financial records for the year ended 31 December 2016 and 31 December 2017. Show all your workings.
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