OBJECTIVE BASED ANSWERS

01. (d) Rs.

Current value 500,000
Carrying amount
(100,000 – (100,000 × 2% × 15 years)) (70,000)
Revaluation gain 430,000
02. (a)
Building A Building B
Current value 400,000 250,000
Carrying amount (170,000) (330,000)
Revaluation gain/(loss) 230,000 (80,000)
The gain on Building A will be credited to other comprehensive income and
the revaluation surplus.
The loss on Building B will be debited to the statement of profit or loss
expenses because we do not have a balance on the revaluation surplus in
respect of building B to offset the loss.
We make an overall debit to non-current assets of Rs. 230,000 – Rs.
80,000 = Rs. 150,000

03. (a) Land Buildings Total

Rs. Rs. m Rs. m
Cost 1 July 2013 1.00 5.00 6.00
Building depreciation
Rs. 5 million/50 years x 2 years (0.2) (0.2)
Carrying amount 30 June 2015 1.00 4.80 5.80
Revaluation gain 0.24 1.96 1.20
Revalued amount 1.24 5.76 7.00
Building depreciation
Rs. 5.76m/48 years x 2 years (0.24) (0.24)
Carrying amount 30 June 2017 1.24 5.52 6.76
Disposal proceeds 6.80
Gain on disposal 0.04
The gain on disposal is Rs. 40,000. The Rs. 1.2 million balance on the
revaluation reserve is transferred from the revaluation reserve to another
reserve account (probably retained earnings) but is not reported through
the statement of profit or loss for the year.

04. (a) IAS 16 (para 31) states that when the revaluation model is used,
revaluations should be made with sufficient regularity to ensure that the
carrying value of the assets remains close to fair value. IAS 16 also states
(para 36) that, if one item in a class of assets is revalued, all the assets in
that class must be revalued.

05. (c) Six months’ depreciation to the date of the revaluation will be Rs. 300,000
(12,000/20 years × 6/12). Six months’ depreciation from the date of
revaluation to 31 March 2015 would be Rs. 400,000 (10,800/13.5 years
remaining life × 6/12). Total depreciation is Rs. 700,000.

Page 1
06. (c) Building a/c
Particulars Rs. Particulars Rs.
b/d 10,000,000 Acc. dep 500,000
Surplus 2,500,000 c/d 12,000,000
12,500,000 12,500,000

Building net debited by Rs. 2,000,000 (2,500,000 – 500,000)

07. (a) Total loss Rs. 13 million, Rs. 10 will be charged to revaluation surplus and
remaining to profit or loss.

08. (b) Depreciation (20 – 8) / 30 years = Rs. 0.4 million

Carrying amount Rs. 20 million less 0.4 million = Rs. 19.6 million

09. (d) Depreciation Now (20 – 8) / 30 years = Rs. 0.4 million

Depreciation Cost (10 – 2) / 40 years = Rs. 0.2 million
Revaluation surplus
= Land Rs. 6 million + Building Rs. 6 million - incremental depreciation 0.2
million = Rs. 11.8 million

10. (d)

11. (a) On disposal of a revalued asset, the full balance of surplus on revaluation
is transferred to retained earnings.

12. (b) Accumulated depreciation = Rs. 216,000-Rs. 145,000=Rs. 71,000

Surplus = Rs. 291,000-Rs. 145,000=Rs. 146,000
Net amount debited to asset = Rs. 146,000-Rs. 71,000=Rs. 75,000

13. (d)

14. (d)

15. (b)

16. Rs. 3,087 The machine has been owned for 2 years 3 months, so the remaining
useful life at 31 March 2017 was 9 years 9 months.
Prior to revaluation it was being depreciated at Rs. 2,500 pa (30,000/12),
so the charge for the first three months of 2017 was Rs. 625.
The machine will now be depreciated over the remaining 9 years 9 months
= 117 months. So the charge for the remaining 9 months of 2017 is Rs.
2,462 ((32,000 / 117) × 9).
So total depreciation for the year ended 31.12.17 is (625 + 2,462) = Rs.
3,087

17. Rs. 75,000 Incremental depreciation = depreciation on revalued amount – depreciation

at cost
Dep. before revaluation = Rs. 7,500,000 / 20 years = Rs. 375,000
Dep. after revaluation = Rs. 7,650,000 / 17 years = Rs. 450,000
Incremental depreciation = Rs. 75,000

18. Rs. 562,500 Depreciation = Rs. 4,500,000/8= Rs. 562,500

19. Rs. 500,000 Revaluation surplus = Rs. 4,000,000 – 4,500,000= Rs. 500,000

20. Rs. 62,500 Incremental depreciation = Dep on revalued amount – Dep on cost
= (4,500,000/8)– (5,000,000/10)
=Rs. 562,500 – 500,000 = 62,500
Alternatively, Rs. 500,000 surplus / 8 years = Rs. 62,500

Page 2
 21. (a)

22. (c)

23. (b)

24. (c)

25. (d)

26. (d)

27. (c)

28. (d)

29. (d)

30. (c)

31. (b)

32. (a)

33. (d) Charge to profit or loss account

34. (b) A plot of land held for resale

35. (d) Fair value of asset given up + cash paid

= Rs. 750,000 + 55,000 = Rs. 805,000
36. (c) Rs. 2,000,000 x (0.75)5 = 474,609
37. Rs. 8,000 gain Net sale proceeds = Rs. 68,000
Accumulated depreciation = Rs. 80,000 / 5 years x 2.25 years = Rs. 36,000
Carrying amount = Rs. 96,000 – 36,000 = Rs. 60,000
Gain on disposal = Rs. 68,000 – 60,000 = Rs. 8,000
38. Rs. 24,000 Net sale proceeds = Rs. 163,000 – 1,000 = Rs. 162,000
gain
Accumulated depreciation Rs.
Depreciation year 1
(Rs. 216,000 – 24,000) / 8 years = 24,000 x 7/12 14,000
Depreciation year 2  Rs. 24,000 x 12/12 24,000
Depreciation year 3  Rs. 24,000 x 12/12 24,000
Depreciation year 4  Rs. 24,000 x 8/12 16,000
78,000
Carrying amount = Rs. 216,000 – 78,000 = Rs. 138,000
Gain on disposal = Rs. 162,000 – 138,000 = Rs. 24,000

39. (b) Change in depreciation method is change in accounting estimate.

40. (b) Gain or loss is recognised in profit or loss

41. (c) Useful life is reviewed annually at each financial year end, at least.

42. (b) Rs. 575,000

43. (b) Rs. 4 million can be currently obtained from disposal of 6 year old similar
machine

Page 3