Question 4: Following balances have been extracted from the ledger of Titan Plc at 31 December 2020 Dr Cг. Land and Building (Note 1) Valuation (1/1/2020) Accumulated depreciation (1/1/2020) Plant and equipment (Note 1) Valuation (1/1/2020) Accumulated depreciation at (1/1/2020): Revaluation surplus (31/12/2020) (Note 1) Retained earnings (31/12/2020) 500,000 80,000 175,000 70,000 209,000 256,450 Note 1 Titan Plc measures its PPE under the revaluation model. On 1 January 2020, the company's land and buildings were valued at £450,000 (Land value £100,000) and its plant and equipment were at £85,000. The valuation has not been reflected in the balances above. On 1 January 2020, the remaining useful lives of the buildings and plant and equipment were reassessed at 20 years and four years respectively. There were no unrecorded acquisitions to or disposals of PPE in the year ended 31 December 2020. The revaluation surplus at 311 December 2020, included £200,000 in respect of land and buildings with the remainder attributable to plant and equipment. Titan plc has a policy of making an annual transfer between the revaluation surplus and retained earnings wherever possible. Depreciation charges for the year ended 31 December 2020 on historical basis would have been £15,000 for plant and equipment and £10,000 for buildings. Required How the above will be reflected in the financial position of the company as at 31 December 2020?
Question 4: Following balances have been extracted from the ledger of Titan Plc at 31 December 2020 Dr Cг. Land and Building (Note 1) Valuation (1/1/2020) Accumulated depreciation (1/1/2020) Plant and equipment (Note 1) Valuation (1/1/2020) Accumulated depreciation at (1/1/2020): Revaluation surplus (31/12/2020) (Note 1) Retained earnings (31/12/2020) 500,000 80,000 175,000 70,000 209,000 256,450 Note 1 Titan Plc measures its PPE under the revaluation model. On 1 January 2020, the company's land and buildings were valued at £450,000 (Land value £100,000) and its plant and equipment were at £85,000. The valuation has not been reflected in the balances above. On 1 January 2020, the remaining useful lives of the buildings and plant and equipment were reassessed at 20 years and four years respectively. There were no unrecorded acquisitions to or disposals of PPE in the year ended 31 December 2020. The revaluation surplus at 311 December 2020, included £200,000 in respect of land and buildings with the remainder attributable to plant and equipment. Titan plc has a policy of making an annual transfer between the revaluation surplus and retained earnings wherever possible. Depreciation charges for the year ended 31 December 2020 on historical basis would have been £15,000 for plant and equipment and £10,000 for buildings. Required How the above will be reflected in the financial position of the company as at 31 December 2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:Question 4: Following balances have been extracted from the ledger of Titan Plc at 31
December 2020
Dr
Cr.
3.
Land and Building (Note 1)
Valuation (1/1/2020)
Accumulated depreciation (1/1/2020)
Plant and equipment (Note 1)
Valuation (1/1/2020)
Accumulated depreciation at (1/1/2020):
Revaluation surplus (31/12/2020) (Note 1)
Retained earnings (31/12/2020)
500,000
80,000
175,000
70,000
209,000
256,450
Note 1
Titan Plc measures its PPE under the revaluation model. On 1 January 2020, the company's land
and buildings were valued at £450,000 (Land value £100,000) and its plant and equipment were
at £85,000. The valuation has not been reflected in the balances above.
On 1 January 2020, the remaining useful lives of the buildings and plant and equipment were
reassessed at 20 years and four years respectively. There were no unrecorded acquisitions to or
disposals of PPE in the year ended 31 December 2020.
The revaluation surplus at 31 December 2020, included £200,000 in respect of land and buildings
with the remainder attributable to plant and equipment. Titan plc has a policy of making an annual
transfer between the revaluation surplus and retained earnings wherever possible. Depreciation
charges for the year ended 31 December 2020 on historical basis would have been £15,000 for
plant and equipment and £10,000 for buildings.
Required
How the above will be reflected in the financial position of the company as at 31 December 2020?
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