Section A

Abyss Mining Co operates deep-sea mining equipment. On 1 January 20X3, Abyss acquired a specialized submersible for $2,000,000 with a useful life of 10 years and nil residual value. Abyss uses the revaluation model. On 31 December 20X4, the submersible was revalued to $1,920,000. On 31 December 20X5, due to technological advancements, the fair value fell to $1,300,000.

What amount should be charged to the statement of profit or loss for the year ended 31 December 20X5 regarding the revaluation decrease?

1 Jan 20X3: Cost $2m. 31 Dec 20X4: CA before reval = $2m - ($2m/10 * 2) = $1.6m. Revalued to $1.92m. Revaluation surplus = $320,000. 31 Dec 20X5: Depreciation = $1.92m / 8 years remaining = $240,000. CA before reval = $1.92m - $240k = $1,680,000. Excess depreciation transferred to retained earnings = $240,000 - $200,000 (historical) = $40,000. Remaining Revaluation Surplus = $320,000 - $40,000 = $280,000. New valuation = $1,300,000. Total loss = $1,680,000 - $1,300,000 = $380,000. This loss first eliminates the $280,000 surplus in OCI. The remaining $100,000 is charged to Profit or Loss.