Silic Case
Accy 510 Silic Case Homework Assignment
Name: Yue (Josie) Deng
Date: June 11, 2012
#1
On 01/01/2003, Silic should record the one-off, fair-value revaluation as result of its adoption of SIIC tax regime. Because the building was appraised at €12,500 and originally bought at €10,000, the firm needs to make a journal entry to account for this increase in value
01/01/2003
Buildings & Land €2,500 Revaluation Surplus €2,500
* Land & Building = €12,500 - €10,000 = €2,500 * As we learned in class from reading Silic’s financial statements, 82.9% of the unrealized gains from revaluation will flow to the Revaluation Surplus account and 17.1% will flow to the Other Creditors account. * €2,500 * 82.9% = €2,072 * €2,500 * 17.1% = €428 * However, in this particular case, we combine the two accounts for simplicity purposes.
On 12/31/2003, Silic need to record a depreciation expense on the building.
12/31/2003
Charge to Depreciation €500 Depreciation & Provisions €500
Revaluation Surplus €100 Consolidated Reserves €100
* As given in the question, the depreciation expense is €500. Silic depreciates its office and buildings on a straight-line basis. We can deduce the useful life of this particular building is 25 years (€12,500/€500 = 25 years). * The company also needs to amortize the revaluation surplus it originally recorded in response to the fair value revaluation based on the useful life of the building. €2,500/25 years = €100. The amortized amount moved to consolidated reserves (retained earnings). On 01/01/2004, Silic sold the building at €12,000 in cash.
01/01/2004
Cash €12,000
Depreciation & Provisions €2,900 Building & Land €12,500 Gains on Disposal €2,400
Revaluation Surplus €2,400 Consolidated Reserves €2,400
* The firm received €12,000 in cash by disposing the asset. The net value of the building was €9,600 (€12,500 - €2,900 = €9,600).
Name: Yue (Josie) Deng
Date: June 11, 2012
#1
On 01/01/2003, Silic should record the one-off, fair-value revaluation as result of its adoption of SIIC tax regime. Because the building was appraised at €12,500 and originally bought at €10,000, the firm needs to make a journal entry to account for this increase in value
01/01/2003
Buildings & Land €2,500 Revaluation Surplus €2,500
* Land & Building = €12,500 - €10,000 = €2,500 * As we learned in class from reading Silic’s financial statements, 82.9% of the unrealized gains from revaluation will flow to the Revaluation Surplus account and 17.1% will flow to the Other Creditors account. * €2,500 * 82.9% = €2,072 * €2,500 * 17.1% = €428 * However, in this particular case, we combine the two accounts for simplicity purposes.
On 12/31/2003, Silic need to record a depreciation expense on the building.
12/31/2003
Charge to Depreciation €500 Depreciation & Provisions €500
Revaluation Surplus €100 Consolidated Reserves €100
* As given in the question, the depreciation expense is €500. Silic depreciates its office and buildings on a straight-line basis. We can deduce the useful life of this particular building is 25 years (€12,500/€500 = 25 years). * The company also needs to amortize the revaluation surplus it originally recorded in response to the fair value revaluation based on the useful life of the building. €2,500/25 years = €100. The amortized amount moved to consolidated reserves (retained earnings). On 01/01/2004, Silic sold the building at €12,000 in cash.
01/01/2004
Cash €12,000
Depreciation & Provisions €2,900 Building & Land €12,500 Gains on Disposal €2,400
Revaluation Surplus €2,400 Consolidated Reserves €2,400
* The firm received €12,000 in cash by disposing the asset. The net value of the building was €9,600 (€12,500 - €2,900 = €9,600).