Remy Corp uses revaluation method for a class of land. The company purchased theland on 1 July 2018 for $1,000,000. Remy Corp has the following information relatedto the land. The fiscal year of the company ends on 30 June. The company sold land at $1,100,000 on 2 July 2021. Ignore tax effects. Date $ 1 July 2018 1,000,000 30 June 2019 1,075,000 30 June 2020 925,000 30 June 2021 1,025,000
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.
Remy Corp uses revaluation method for a class of land. The company purchased theland on 1 July 2018 for $1,000,000. Remy Corp has the following information relatedto the land. The fiscal year of the company ends on 30 June. The company sold land at $1,100,000 on 2 July 2021. Ignore tax effects.
Date $
1 July 2018 1,000,000
30 June 2019 1,075,000
30 June 2020 925,000
30 June 2021 1,025,000
a) AASB 116 “Property, Plant and Equipment” allows business entities to chooseeither the cost model or the revaluation model after recognition as an asset. Explain the advantages and disadvantages of using the revaluation model compared to the cost model for property, plant and equipment.
(b) Prepare all
(c) Determine the amounts to be reported by Remy Corp as at 30 June 2020 and 30 June 2021 for the following items: (i) Land, (ii) Other Comprehensive Income (OCI), (iii) Loss on Revaluation, and (iv) Revaluation Surplus.
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