Illustration 2 : Revalution of property, plant and equipment Laju Bhd acquired a building for RM5,000,000 on 1 January 2014. The estimated useful life of the building was 40 years. On 1 January 2018, the building was revalued and its fair value on that date was RM7,200,000. Laju Bhd also revalued its land on 1 January 2018 at the fair value of RM800,000. The land was bought by Laju Bhd on 1 January 2015 for RM500,000. On 31 December 2018, Laju Bhd revalued its equipment to RM200,000. The equipment was purchased by Laju Bhd on 1 January 2016 for RM300,000 with the estimated useful life of 10 years.
Required: Prepare the schedule of movement of Laju Bhd’s assets for the year ended 31 December 2018. Solution- illustration 2 Steps 1.
Analyse the information given : Revaluation of land, building and equipment Timeline : building
Timeline : Land
3 years 1.1.2015
1.1.2018
Acquisition :
Revaluation
Land=RM500,000
FV=RM800,000
31.12.2018
CA=W2
Steps a
Determine the FV as at 1.1.2018
RM800,000
b
Determine the carrying amount (CA) as at 1.1.2018: W2
RM500,000
=RM500,000-0=500,000 Since FV>CA, there is a surplus on revaluation
RM300,000
Timeline : equipment
2 years 1.1.2016
1.1.2018
31.12.2018
Acquisition :
Revaluation
Equipment =RM300,000
FV=RM200,000 CA=W3
Steps a
Determine the FV as at 31.12.2018
RM200,000
b
Determine the carrying amount (CA) as at 31.12.2018: W3
RM210,000
=300,000- [300,000/10]x3years=300,00090,000=210,000 Since FV<CA, there is a deficit on revaluation
2.
RM10,000
prepare the template for notes to account on property, plant and equipment Building
Land
Equipment
Balance b/d as at 1 January 2018
5000,000
500,000
300,000
Surplus / (deficit) on revaluation
2700,000
300,000
(10,000)
Elimination of AD against valuation
(500,000)
(-)
(90,000)
Balance c/d as at 31 December 2018
7200,000
800,000
200,000
Balance b/d as at 1 January 2018
500,000
-
60,000
Charge for the year [7200,000/36]
200,000
-
30,000
Cost / Valuation
Accumulated depreciation
Elimination of AD against valuation
(500,000)
(90,000)
Balance c/d as at 31 December 2018
200,000
-
-
Carrying amount -31 December 2018
7,000,000
-
200,000