Question 1 Tap Sdn Bhd bought an asset on 5 April 2017 at a cost of RM180,000. The asset had an expected useful life of 10 years and an expected residual value of RM20,000. The company applies straight-line depreciation to this category of non-current assets. It also charges a full year depreciation in the year of acquisition and no depreciation in the year of disposal. Its financial year ends on 31 December.

At 31 December 2018, the company revalued the asset to RM240,000. Its expected remaining useful life is now 8 years, but its expected residual value is zero.

Required:

(a) Show in T account the accounting entries required to record the revaluation of the asset on 31 December 2018. [4 marks]

(b) The asset was sold on 12 February 2020 for RM235,000. Calculate the gain or loss on disposal reported in the income statement for Year 2020, and show the total effect on the disposal on the retained earnings of the company. Ignore taxation. [4 marks]