6 Questions
What is the policy of Bumel Limited regarding the revaluation of its plant?
Revalue plant every two years on a gross replacement value basis.
How does Bumel Limited treat the revaluation surplus on the plant?
Realize the revaluation surplus whilst the asset is being used.
How does Bumel Limited account for accumulated depreciation after revaluation?
Offset the accumulated depreciation against the gross carrying amount of the asset on revaluation.
What method does Bumel Limited use to depreciate its plant?
Straight-line basis.
How often does Bumel Limited revalue its plant?
Every two years.
What must be the basis for calculating depreciation in the current year according to Bumel Limited's policy?
Most recent revalued amount.
Study Notes
Bumel Limited - Plant Revaluation and Depreciation
- The company revalues its plant every two years on a gross replacement value basis.
- As of 31 December 2022, the plant's gross replacement cost is R1 470 000.
Plant Details
- Cost price: R1 260 000 (purchased on 1 January 2020)
- Residual value: Rnil
- Useful life: 10 years
Depreciation
- Depreciation method: Straight-line basis
- Depreciation calculation: Based on the revalued amount of the plant
- Depreciation expense will be calculated for the year ended 31 December 2022
Revaluation and Accumulated Depreciation
- Revaluation surplus is realized while the asset is in use
- Accumulated depreciation is offset against the gross carrying amount of the asset on revaluation
Taxation
- Tax rate: 28%
- Note: Deferred tax resulting from wear and tear allowances is ignored
Test your knowledge on International Accounting Standard 16 - Property, Plant, and Equipment with a scenario involving Bumel Limited's revaluation of its plant assets. Answer questions on revaluation policies, treatment of revaluation surplus, and offsetting accumulated depreciation against the gross carrying amount.
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