1. The circumstances in which the revaluation model may be used: (In accordance with IAS 38)
There is active market, since the fair value of an intangible asset must be determined by reference to an active market in that type of asset. Sufficient regularity to ensure that the carrying amount of an intangible asset does not differ materially from fair value A. The 25000 revaluation decrease on 31 December 2011 should be recognized as an expense. 25000 of the 45000 in decrease on 31 December 2012 should be recognized as income. The remaining 20000 should be credited to a revaluation reserve and recognized as other comprehensive income. B. 95000 may be transferred from revaluation reserve to retained earnings. This transfer should be shown in the statement of changes in equity. C. The 10000 revaluation increase on 31 December 2011 should be credited to a revaluation reserve and recognized as other comprehensive income 10000 of the 25000 decrease on 31 December 2012 should be debited to revaluation reserve and recognized (as negative figure) in other comprehensive income. The remaining 15000 should be recognized as an expense.
Start of year| Fair value of asset| Rental paid| Opening capital outstanding| Interest| Closing capital outstanding| 2011| 2,997,000| 785,000| 2,212,000| 346178| 2,558,178| 2012| | 785,000| 1,773,178| 277502 | 2,050,680|
(a) Profit before tax
Add back |
Rental payment | +785,000 |
Interest | -346,178 |
Depreciation | -599,400 |
Reduction in profit before tax | 160,578 |
(b) total assets
Non-current assets: 2,997,000*4/5=2397600 net increase
(c) current liability: 785,000
(d) non-current liability: 1,773,178
3. (a) international standard IAS 2 defines inventories as”assets” 1. Held for sale in the ordinary course of business
2. In the process of process of production for such sale, or 3. in...