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Unformatted text preview: ESTION 2 c (2 marks)
Relevance: The revaluation method provides a relevant value for land as it is an estimate
of the current market value (or similar words to that effect). 1 Mark
Reliability: The revaluation method does not provide a reliable figure as it is an estimate
of what may be obtained between willing and knowledgeable buyers and sellers at an
arm’s length. 1 Mark
Alternative answer: The revaluation method provides a reliable value as it is obtained
from an independent valuer’s report.
* Alternative answer should be awarded marks.
*Merely writing down the definition does not suffice. Application of definition to the
given case should be done.
1 Homework Question: Comparison between cost and revaluation method
Land Y0 Buy for
$100,000 Cost Method (AASB116/136) Revaluation Method (AASB116)* Recorded
$100,000 Journal Entry $150,000 Dr Land $50,000
Cr Revaluation Reserve $50,000 (OCI) $120,000 Dr Revaluation Reserve $30,000 (OCI)
Cr Land $30,000 Journal Entry
Dr Land $100,000
CR Cash $100,000 Dr Land $100,000
CR Cash $100,000 Y1 Market
$150,000 $100,000 Y2 Market
$120,000 $100,000 Y3 Market
value: $75,000 $75,000 Dr Loss on impairment $25,000
Cr Allowance for impairment $25,000 $75,000 Dr Loss on devaluation of Land $25,000 (P&L)
Dr Revaluation Reserve $20,000 (OCI)
Cr Land $45,000 Y4 Market
$110,000 $100,000 Dr Allowance for impairment $25,000
Cr Gain on reversal of impairment $25,000 $110,000 Dr Land $35,000
Cr Gain on revaluation of Land $25,000 (P&L)
Cr Revaluation Reserve $10,000 (OCI) No journal entry No journal entry *Assuming land is revalued on a yearly basis.
OCI= Other comprehensive income (AASB101)
Note: new terminology: Revaluation Reserve instead of Asset Revaluation Reserve.
Special thanks to Brian Booth for his technical expertise. 2...
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This homework help was uploaded on 03/23/2014 for the course ACCT 1511 taught by Professor Kim during the Three '10 term at University of New South Wales.
- Three '10