Question

A property was purchased at a cost of $10m on 1 January 2017. It has a useful life of 10 years with straight-line depreciation and no residual value.

1. At 1 January 2018, the property was revalued to $12m and its useful life remains unchanged. Prepare the journal entry to account for this revaluation.
2. At 1 January 2019, the property was revalued to $6m and its useful life remains unchanged. Prepare the journal entry to account for this revaluation.
3. At 1 January 2020, the property was revalued to $10m and its useful life remains unchanged. Prepare the journal entry to account for this revaluation.

Answer 1

Date	Particulars	Debit	Credit
1 january, 2018	Depreciation a/c Dr.	1000000
	To property a/c		1000000
	Property a/c Dr.	3000000
	To revaluation reserve a/c		3000000
	(12m- (10m - 1m )}
1 january, 2019	Depreciation a/c Dr.	1333333
	To property a/c		1333333
	Revaluation reserve a/c Dr.	3000000
	Impairment loss a/c Dr.	1666667
	To property a/c		4666667
1 january, 2020	Depreciation a/c Dr.	750000
	To property a/c		750000
	Property a/c Dr.	4750000
	To impairment loss		1666667
	To revaluation reserve		3083333

> 1 m = 1000000

> Depreciation in 2018 = 10m /10 = 1 m

> Depreciation in 2019 = 12m / 9 = 1333333

> Depreciation in 2020 = 6m/8 =750000