Lydia Ltd is a small company that operates in the construction industry. The company uses the revaluation
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- Lydia Ltd is a small company that operates in the construction industry. The company uses the revaluation model to recognise and measure its property, plant and equipment (PPE). At 1st of January 2017, Lydia Ltd purchased a heavy equipment, for its operations, for £4.5m. At the time of the purchase the equipment had zero residual value and an expected useful life of 35 years. At 1st January 2021, the company decided to revalue its equipment. At the time of revaluation, the expert's report advised that the residual value and useful life of the equipment remained unchanged. Importantly, the expert's report advised that the value of the equipment as at 1st January 2021 was £6m.
- What is the difference between the Net Book Value (NBV) of the equipment at the last financial year end prior the revaluation and the second financial year end after the revaluation? Note that the financial year end of Lydia Ltd is 31st December and it uses straight line depreciation method.
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