Leaving Cert Accounting Revaluation of Fixed Assets: Revaluation of Fixed Assets

1 J

Question

Revaluation of Fixed Assets

1 January 2002 McGrath Ltd. owned freehold property and land which cost €670,000, consisting of land €240,000 and buildings €430,000. 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 eight years earlier and depreciation had been charged against profits in each of these eight years (land is not depreciated).

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

Jan 1 2002 Re-valued property at €810,000. Of this revaluation €290,000 was attributable to land.
Jan 1 2003 Sold for €430,000 which cost €240,000 but was since re-valued on 1/1/2002
Jan 1 2004 Purchased buildings for €470,000. During the year 2004, €150,000 was paid to a building contractor for an extension to these newly purchased buildings. The company’s own employees also worked on the extension and they were paid wages amounting to €80,000 by McGrath Ltd. for this work.
Jan 1 2005 Sold re-valued buildings worth €1,403,000 at 15% increase in respect of each building. 
Dec 31 2006 the remaining buildings owned on 1/1/2002. The remaining buildings were re-valued at €860,000.

You are required to:
(a) Prepare the relevant ledger accounts in respect of the above transactions for the years ended 31 December 2002 to 31 December 2006.
(Bank Account and Profit and Loss Account not required)

(b) Show relevant extract from Balance Sheet as at 31/12/2006.

Date	Details	€
01/01/02	Balance b/d	670,000
01/01/02	Revaluation Reserves	140,000
	Balance c/d	810,000
31/12/02	Balance c/d	810,000
01/01/03	Balance b/d	810,000
01/01/03	Disposal	-290,000
	Balance c/d	520,000
31/12/03	Balance c/d	520,000
01/01/04	Balance b/d	520,000
01/01/04	Purchase	470,000
	Balance c/d	990,000
31/12/04	Balance c/d	990,000
01/01/05	Balance b/d	990,000
01/01/05	Wages for extension	80,000
	Balance c/d	1,070,000
31/12/05	Balance c/d	1,070,000
01/01/06	Balance b/d	1,070,000
01/01/06	Revaluation Reserves	185,000
	Balance c/d	1,255,000
31/12/06	Balance c/d	1,255,000

Date	Details	€
01/01/02	Revaluation Reserves	68,800
31/12/02	Balance b/d	10,400
	Balance c/d	79,200
31/12/03	Balance c/d	79,200
01/01/03	Balance b/d	79,200
01/01/03	Sale	20,800
	Balance c/d	58,400
31/12/03	Balance c/d	58,400
01/01/04	Balance b/d	58,400
01/01/04	Balance	45,200
	Balance c/d	45,200
31/12/04	Balance c/d	45,200
01/01/05	Revaluation Reserves	28,600
31/12/05	Balance c/d	23,260
31/12/05	Disposal	42,000
31/12/06	Balance c/d	17,200

Date	Details	€
01/01/06	Land and Buildings	598,000
31/12/06	Profit & Loss	73,960
31/12/06	Bank	660,000
	Balance c/d	671,960

Date	Details	€
01/01/03	Revenue Reserves	0
01/01/06	Land and Buildings	14,000
01/01/06	Provision for Depreciation	68,800
	Balance c/d	508,100

Date	Details	€
01/01/03	Revaluation Reserve	50,000
01/01/06	Revaluation Reserve	268,000
	Balance c/d	318,000

Revaluation of Fixed Assets 1 January 2002 McGrath Ltd - Leaving Cert Accounting - Question 3 - 2007

Worked Solution & Example Answer:Revaluation of Fixed Assets 1 January 2002 McGrath Ltd - Leaving Cert Accounting - Question 3 - 2007

Prepare the relevant ledger accounts in respect of the above transactions for the years ended 31 December 2002 to 31 December 2006

Land and Buildings Account

Provision for Depreciation on Buildings Account

Disposal of Buildings Account

Revaluation Reserve Account

Revenue Reserve Account

Extract from Balance Sheet as at 31/12/2006

Show relevant extract from Balance Sheet as at 31/12/2006

Extract from Balance Sheet as at 31/12/2006

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Fixed Assets
Land and Buildings	860,000
Provision for Depreciation	-17,200
Revaluation Reserve	19,000
Total Fixed Assets	842,800