The year-end Trial Balance of a business owned by Stella Hanson included the ledger balances listed on the right. Stella wishes to report the land and buildings at their current market value on 30 June 2011 and has identified the market value on that date as £4.5 million. A third of the cost/value relates to land, which is not depreciated. Furniture acquired at a cost of £800,000 on 1 January 2008 was sold on 31 March 2011 for £240,000, but other than posting the proceeds to the Disposal account, the sale of furniture is not accounted for. Buildings and furniture are both depreciated, on the straight-line method, at 2% and 10% per annum respectively. Brand name, acquired on 1 July 2010, is to be depreciated on the sum of the years’ digits method over an expected economic life of five years.

Required:

(a) Show how these transactions will feature in the Statement of income for the year ended 30 June 2011 and in the Statement of financial position as at that date.

(b) Identify the gain on revaluation of land and buildings.

Transcribed Image Text:

Trial Balance as at 30 June 2011 Land and buildings at cost Furniture at cost Brand names at cost Accumulated depreciation to 30 June 2010: Building Furniture Disposal of furniture £'000 £'000 3,600 1,600 720 - T 672 600 240