On 1st January 2019, Maali limited had an old machinery with a cost of Rwf 16,000 and accumulated depreciation of Rwf 5,000. An impairment loss of Rwf 1,000, had previous been provided. Depreciation charged provided per year is Rwf 1,100. On 31st December 2021, a revaluation was done that revealed a fair value of Rwf 9,600. Required: Based on requirement s of IAS 16 and 36, Discuss how impairment loss was treated Compute revaluation surplus and discuss how it was treated Discuss how gain on disposal and revaluation surplus balance should be treated upon de-recognition of the asset.
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 1st January 2019, Maali limited had an old machinery with a cost of Rwf 16,000 and
Required: Based on requirement s of IAS 16 and 36,
- Discuss how impairment loss was treated
- Compute revaluation surplus and discuss how it was treated
- Discuss how gain on disposal and revaluation surplus balance should be treated upon de-recognition of the asset.
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