Machine A:
Treat the delivery expenses as costs. They constitute the cost of the machine.
Assumption: a machine is charged but none is provided when the machine is disposed off
(100000-0)/10= 100000 per annum
And if pro rata basis is used, then depreciation will be 50000 (100000/2), representing the 6 months of its service from July to December 2012.
Machine B:
As per old policy of 10 yrs useful life, the depreciation will be (600000-0)/10 =60000 per annum.
For 4 years up to 30 June 2012 when the asset was reviewed, its accumulated depreciation was (60000*4) 240000.
The book value as per 30 June 2012, it will 600000-240000= 360000.
The annual depreciation after the asset was reviewed will be 360000/4= 900000
The reason for the increase in the depreciation value id because of reduced useful life of the machine.
The evidence for and against the theory that the stock market share prices fully and fairly reflect known information
The efficient market hypothesis proposes that the current securities price reflect the publicly available information about the value of the company. The market hypothesis is also known as the random walk theory. According to the theory, there are no chances of earning excess profits in the financial markets by using the publicly available information. The main issue addresses in the theory is why there are changes in the security prices in the financial market and how the changes takes place. According to Fama, high competition leads to disclosure of new information in the market. The new information will have an impact on the actual prices of the securities.
Building X
The business building will be depreciated using the straight-line method. After review, the property will property will be revalued basing on the new figures and on pro rata basis. Building X and Y would be approached in the same way of calculating depreciation, except that for the investment property, the term that will be used is impairment loss rather than depreciation.
The value of building X is 1,000,000/50=20000.
The accumulated depreciation for the 5 years is 20000*5= 100,000.
In this case, the building cost will be Debited while the Revaluation Reserve will be Credited.
The book value is 1000000-100000=900,000.
In the event that the property is revalued, the new policy applies to all the properties. In this case, a gain on revaluation recognised as equity under revaluation reserve.
After revaluation, the value of building X at the date of revaluation is 2000000 but the initial value was at that date is 900000.
The difference between the two is 2000000-900000
Thus, there is an increase of 1,100,000
The annual depreciation for the remaining useful life is 1,100,000/45 = 24,444.44
But since at revaluation both buildings were revised to 50 years, the annual depreciation will be 1100000/50 = 22000.
At 31 December 2012, one year later, revaluation was done and the new value was 2.5 million.
The carrying amount as at 31 December 2012 is1,100,000– (1*22000)= 1,078, 000
After new revaluation, the value is 2,500,000-1,078, 000 = 1,422,000
This exceeds the fair value by (1,422,000-1100000)=322,000
(b)
There are no impairment losses since the value was less than what was in the initial reserve.
The only difference is the business property will be depreciated while investment property will be only impairment losses will be considered in the books of accounts.
References
Accounting for property, plant and equipment,
http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/sa_sept10_ias16.pdf
Accounting Explained, Revaluation of Fixed Assets,
http://accountingexplained.com/financial/non-current-assets/revaluation-of-fixed-assets
IFRS Workbook, Investment Property, http://www.google.co.ke/url?sa=t&rct=j&q=&esrc=s&source=books&cd=1&ved=0CDQQFjAA&url=http%3A%2F%2Fwww.banks2ifrs.ru%2Fcgi-bin%2Fget.cgi%3Ffile%3D1614%26lng%3Den&ei=wNOpUJ6yB4qohAe024CQBw&usg=AFQjCNGZYT6AwU7su-iSYz4mfXaZltX1Sw.
