Leaving Cert Accounting Fixed Assets Valuation: Revaluation of Fixed Assets

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Revaluation of Fixed Assets

On 1 January 2007 Logan Ltd owned freehold buildings which cost €360,000 and adjacent land which cost €240,000. The company depreciates its buildings at the rate of 2% per annum straight line method. It is the company’s policy to apply a full year’s depreciation in the year of acquisition and no depreciation in the year of disposal. This property had been purchased on 01/01/2003 and depreciation had been charged against profits in each of the four years (land is not depreciated).

The following details were taken from the firm's books:

1 Jan 1 2007 Re-valued land and buildings at €700,000. Of this re-valued amount €270,000 was attributable to land.

1 Jan 1 2008 Sold for €220,000 adjacent land which cost €240,000 but was since re-valued on 01/01/2007.

1 Jan 1 2009 Purchased buildings for €500,000. During the year 2009, €100,000 was paid to a contractor for an extension to the existing premises. The company’s own employees also worked on the extension and they received paid wages totalling €30,000.

1 Jan 1 2010 Re-valued buildings at €1,188,000.

1 Jan 1 2011 Sold for €473,000 the buildings owned on 01/01/2007. The remaining buildings are re-valued at €950,000.

(60 marks)

Date	Details	Dr	Cr	Balance
01/01/2007	Balance b/d	600,000		600,000
	Revaluation Reserve	100,000		700,000
01/01/2008	Balance c/d		220,000	700,000
31/12/2008	Balance b/d	700,000		700,000
01/01/2009	Balance b/d	430,000		430,000
01/01/2009	Bank	100		1,080,000
01/01/2009	Wages	30,000		1,080,000
01/01/2010	Balance b/d	1,080,000		1,080,000
01/01/2010	Revaluation Reserve	108,000		1,188,000
01/01/2011	Balance b/d	1,188,000		1,188,000
01/01/2011	Disposal		473,000	715,000
31/12/2011	Balance c/d			950,000

Date	Details	Dr	Cr	Balance
01/01/2007	Balance b/d	28,800		28,800
31/12/2007	Balance c/d		37,400	37,400
31/12/2008	Balance b/d	17,200		17,200
31/12/2009	Balance c/d		38,800	38,800
01/01/2010	Revaluation Reserve	38,860		38,860
31/12/2010	Balance b/d	42,760		42,760
01/01/2011	Buildings	9,460		9,460
31/12/2011	Balance c/d			42,760

Date	Details	Dr	Balance
01/01/2008	Revenue Reserves	30,000	30,000
01/01/2011	Revenue Reserves	167,600	327,300
31/12/2011	Balance c/d		327,300

Fixed Assets	Amount
Land and Buildings	€950,000
Capital and Reserves
Revaluation Reserve	€327,300
Revenue Reserve	€197,600
Total	€931,000

Revaluation of Fixed Assets On 1 January 2007 Logan Ltd owned freehold buildings which cost €360,000 and adjacent land which cost €240,000 - Leaving Cert Accounting - Question 3 - 2007

Worked Solution & Example Answer:Revaluation of Fixed Assets On 1 January 2007 Logan Ltd owned freehold buildings which cost €360,000 and adjacent land which cost €240,000 - Leaving Cert Accounting - Question 3 - 2007

Prepare the relevant ledger accounts in respect of the above transactions for each of the years ended 31 December 2007 to 31 December 2011.

Land and Buildings Account

Provision for Depreciation Account

Revaluation Reserve Account

Balance Sheet (extract) as at 31/12/2011

(b) (i) Show the relevant extract from the Balance Sheet as at 31/12/2011.

(b) (ii) What factors are taken into account in arriving at an annual depreciation charge?

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