QUESTION 1 [January 2014, Question 5 Amended]

Swan Limited prepares its financial statements to 31 December each year, and the following issues need to be resolved before the financial statements for the year ended 31 December 2013 can be finalised.

Issue 1:

Swan Limited acquired a new property on 1 January 2007 for 2,400,000. On this date, the property had an estimated useful economic life of 50 years with no residual value. The directors of Swan Limited decided to apply the cost model to measure the property and to depreciate it on a straight-line basis. Swan Limiteds policy in relation to depreciation is to time apportion in both the years of purchase and disposal.

On 31 December 2013, the directors of Swan Limited decided that it would be more appropriate to use the revaluation model for measuring the property as it would provide more relevant and reliable information. The fair value of the property was estimated to be 3,000,000 on this date.

Requirement

Explain clearly how the property should be reflected in the financial statements of Swan Limited in each of the financial years ended 31 December 2007 to 2013, showing any adjustments required.

Q1

Question 1 (Swan Limited)

Issue 1:

Immediately prior to accounting for the revaluation at 31 December 2013, what is the accumulated depreciation at this date?

Group of answer choices

336,000

3,000,000

48,000

2,400,000