IAS 16 Property Revaluation and Depreciation Tutorial

Jul 17, 2026

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IAS 16 revaluation and depreciation exercises covering property, plant and equipment. Hendrix Co records a revaluation of property on 1 January 20X8 and determines the 31 December 20X8 depreciation expense based on remaining useful life and updated carrying amount. Saturn Co addresses disposal of a previously revalued property, including treatment of revaluation surplus and profit or loss. Diamond and Willow cases require ledger postings and full financial statement preparation, incorporating straight-line and reducing-balance depreciation, revaluation of land, component accounting for cost and accumulated depreciation, inventories adjustments, write-off of receivables, and treatment of advertising accruals and loan interest.

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1. On 1 January 20X8 Hendrix Co revalued its property to $200,000 . Up to the date of the revaluation, the asset had been accounted for at a cost of $160,000, and had accumulated depreciation $40,000 . The property had an expected useful life of fifty years from the date of purchase and nil residual value. State the accounting entries required to account for the revaluation in the financial statements of Hendrix Co. How much depreciation expense for the year ended 31 December 20X8? 2. Saturn Co disposed of a property that had been revalued in an earlier accounting period. The details relating to this property are as follows: $000 Carrying amount at disposal date 150 Disposal proceeds 165 Revaluation surplus at disposal date 15 How should the property disposal be accounted for in Saturn’s financial statements? A Gain on disposal of $15,000 included in profit or loss for the year only. B Gain on disposal of $30,000 included in profit or loss for the year only. C Gain on disposal of $15,000 included in profit or loss for the year and revaluation gain of $15,000 included in other comprehensive income for the year. D Gain on disposal of $15,000 included in profit or loss for the year and a transfer within the statement of changes inequity of $15,000 from revaluation surplus to retained earnings. 3. Diamond is a trading company making up its accounts regularly to 31 December each year. At 1 January 2013 the following balances existed in the records of Diamond: $000 Land – cost 1,000 Buildings – cost 500 Aggregate depreciation charged on buildings to 31 December 2012 210 Office equipment – cost 40 Aggregate depreciation charged on office equipment to 31 December 2012 24 The company’s depreciation policies are as follows: Land – no depreciation Buildings – depreciation charged at 2% per annum on cost on the straight line basis. Office equipment – depreciation charged at 12½% per annum on the straight line basis. A full year’s depreciation is charged in the year of acquisition of all assets and none in the year of disposal. During the two years to 31 December 2014 the following transactions took place: (1) Year ended 31 December 2013: (i) 10 June Office equipment purchased for $16,000 . This equipment was to replace some old items which were given in part exchange. Their agreed part exchange value was $4,000 . They had originally cost $8,000 and their carrying value was $1,000. The company paid the balance of $12,000 in cash. (ii) 8 October An extension was made to the building at a cost of $50,000 . (2) Year ended 31 December 2014: 1 March Office equipment which had cost $8,000 and with a written-down value of $2,000 was sold for $3,000 . In preparing financial statements at 31 December 2014 it was decided to revalue the land upwards by $200,000 to reflect a recent survey. Required: Write up the necessary ledger accounts to record these transactions for the TWO years ended 31 December 2014. (

Jul 17, 2026

Upload by Asher