Question 1

(1) On 1st January 2018 a company buys a non-current asset for 20,000. The asset has a five-year life and an estimated residual value of 3,000. What is the net book value of the asset on 31st December 2021 if it is to be depreciated on: (a) straight line basis

(b) reducing balance basis at a rate of 31.6%

(2) On 31st December 2021 the same asset (as in (1) above) is revalued to 15,000 and its remaining useful life is extended to four years from this date. The residual value is unchanged at 3,000. What would be the annual depreciation charge assuming a straight-line basis of depreciation?

(3) Assuming depreciation is charged on a straight-line basis, from the information given in (1) (a) and (2), what amount will appear in the revaluation reserve?