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Depreciation and Revaluation of Fixed Assets The following details were taken from the books of Brophy Ltd: 01/01/2007 Buildings at cost amounted to €990,000 01/01/2007 The balance in the Provision for Depreciation account was €173,000 01/06/2007 Purchased a building for €640,000 01/07/2007 Sold for €420,000 a building which cost €210,000 - Leaving Cert Accounting - Question 3 - 2009
Question 3
Depreciation and Revaluation of Fixed Assets The following details were taken from the books of Brophy Ltd: 01/01/2007 Buildings at cost amounted to €990,000 01/... show full transcript
Worked Solution & Example Answer:Depreciation and Revaluation of Fixed Assets The following details were taken from the books of Brophy Ltd: 01/01/2007 Buildings at cost amounted to €990,000 01/01/2007 The balance in the Provision for Depreciation account was €173,000 01/06/2007 Purchased a building for €640,000 01/07/2007 Sold for €420,000 a building which cost €210,000 - Leaving Cert Accounting - Question 3 - 2009
Step 1
The Buildings Account for the two years 2007 and 2008.
Answer
To record the Buildings Account for 2007 and 2008, we will make entries for each relevant date:
Buildings Account
DR € CR
01/01/2007 990,000 01/07/2007 210,000
01/06/2007 640,000 31/12/2007 1,240,000
01/01/2008 1,500,000
- The initial balance at the start of 2007 was €990,000.
- A new building for €640,000 was added.
- Disposal of the building for €210,000 was recorded.
- The balance carried forward at the end of 2007 is €1,240,000.
- The re-valuation at the beginning of 2008 leads to an opening balance of €1,500,000.
Step 2
The Provision for Depreciation Account for the two years 2007 and 2008.
Answer
The Provision for Depreciation Account must include entries for the depreciation for each year.
Provision for Depreciation Account
DR € CR
01/01/2007 173,000 01/07/2007 70,000
31/12/2007 35,000 31/12/2007 208,000
31/12/2008 45,000
- Start with the balance at the beginning of 2007, €173,000.
- A disposal amounting to €70,000 is recorded, and the provision for depreciation for 2007 is added.
- Total depreciation at year-end is €208,000. An additional provision for 2008 is also recorded.
Step 3
The Buildings Disposal Account for the year ended 31/12/2007.
Answer
This account records the sale of the building.
Disposal of Buildings Account
DR € CR
01/07/2007 210,000 01/07/2007 420,000
- The sale proceeds from disposing of the building are recorded on the credit side, and the cost is recorded on the debit side.
Step 4
The Revaluation Reserve Account.
Answer
This account captures the adjustments related to the revaluation of assets.
Revaluation Reserve Account
DR € CR
01/01/2007 0 01/07/2007 260,000
01/01/2008 0 01/01/2008 398,000
- The revaluation reserve reflects the asset increase leading to new balances to account for.