Answer to Question #188840 in Accounting for Eric

Question

MTN Ghana Ltd. acquired a brand new property (land and buildings)on 1st January, 2016

for GH¢ 40 million (including GH¢15 million in respect of the land).The asset was

revalued on the 31st of December, 2017 to GH¢ 43 million (including GH¢16.6 million in respect of the land).The buildings element was depreciated over a 50-year useful life to a

zero residual value. The usefulll life and residual value did not subsequently need revision.

On the 31st of December, 2018 the property was revalued downwards to GH¢ 35 million as

A result of the recession (including GH¢14 million in respect of the land).The company

makes a transfer from revaluation surplus to retained earnings in respect of realised profit.

Required:

i. Determine the amounts that should be recognised in profit or loss and other

comprehensive income for the years ended 31 December 2017 and 31 December

2018.

Answer 1

1)Depreciation on land will be nill

Depreciation charged on building is

Total cost 40million$

Land cost. (15millon$)

Building cost. 25million$

Life of building = 50years

Depreciation = 25milion/50 = 5lakh$ per year

2) The gain on revaluation made on 31 December 2017 will be shown in Revaluation Reserve. This cannot be transferred to Retained earnings as it has not realized.

On 31st December 2018, the downward revaluation will be adjusted with existing Revaluation Reserve.