9.3 Disposal of fixed assets
　　●Profit or loss on disposal
　　- Proceeds (Selling price- cash or part disposal allowance)
　　Proceeds > NBV at disposal date Profit
　　- Proceeds < NBV at disposal date Loss
　　- Proceeds = NBV at disposal date Neither
　　●Disposal for cash consideration
　　Step 1. Remove the original cost of the non-current asset from the “non-current asset” account.
　　Dr. Disposal
　　Cr. Non-current asset original cost non-current asset
　　Step 2. Remove accumulated depreciation on the non-current asset from the “accumulated depreciation” account.
　　Dr. Accumulated depreciation X
　　Cr. Disposals X
　　Step 3. Record the cash proceeds
　　Dr. Cash proceeds
　　Cr. Disposal
　　The balance on the T-account is the profit or loss on disposal.
　　●Disposal through a part exchange agreement
　　- it arises where an old asset is provided in part payment for a new one, the balance of the new asset being paid in cash.
　　- The procedure to record the transaction is very similar to the three-step process seen for a cash disposal.
　　- But there is the fourth step:
　　Step 1. Remove the original cost of the non-current asset from the “non-current asset” account.
　　Dr. Disposal X
　　Cr. Non-current asset original cost non-current asset X
　　Step 2. Remove the accumulated depreciation on the non-current asset from the “accumulated depreciation” account.
　　Dr. accumulated depreciation X
　　Cr. Disposals X
　　Step 3. Record the part exchange allowance (PEA) as proceeds
　　Dr. non-current asset (= part of the new asset) PEA
　　Cr. Disposal (= sale proceeds of the old assets) PEA
　　Step 4. Record the cash paid for the new asset
　　Dr. non-current asset cash
　　Cr. Cash
　　Again, the balance on the T account is the profit or loss on disposal.
　　9.4 R*uation of fixed assets
　　Historical cost convention:
　　Under the historical cost convention, assets are stated in the balance sheet at their purchase price at the date of acquisition (less any amounts written off in respect of depreciation or diminution in value).
　　Some non-current asset, such as land and building may rise in value over time.
　　Business may choose to reflect the current value of the asset in their statement of financial position. This is known as “ r*uing the asset”.
　　●The difference between the NBV of the asset and the r*ued amount (normally
　　a gain) is recorded in a r*uation reserve in the capital section of the statement of financial position.
　　●This gain is not recorded in the income statement because it is unrealized, i.e. it is not realized in the form of cash.
　　●IAS 1 requires that a r*uation gain is disclosed in “ other comprehensive
　　income – OCI on the statement of financial position.
　　●In summary, R*uation surplus = r*ued amount – NBV
　　- For a non-depreciated asset,
　　Dr. non-current asset- cost R*uation surplus
　　Cr. R*uation reserve R*uation surplus
　　- For a depreciated asset,
　　Dr. accumulated depreciation depreciation to date
　　Dr. non-current asset – cost (balance)
　　Cr. R*uation reserve R*uation surplus
　　Example:
　　Shirley owns a factory. The premises were purchased on 1 Jan 20x1 for 450,000 and depreciation charge at 2% pa straight line.
　　Shirley now wishes to r*ue the factory premises to $800,000 on 1 Jan 20x7 to reflect the market value.
　　What is the balance on the r*uation reserve after this transaction?
　　A.350,000　　B.395,000　　C.404,000　　D.413,000
　　Solution:
　　R*uation reserve = r*ued amount – NBV
　　NBV = Cost of the asset – accumulated depreciation
　　= 450,000 – 450,000 x 2% x 6 years = 396,000
　　So r*uation reserve = 800,000 – 396,000 = 404,000
　　Answer is C.