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In question, it is not saying anything regarding that excessive depreciation policy is implemented or not. If it is saying that find revaluation surplus at end of year. So what should we do?
(For example question below)Question
Homer, a company purchased an office building on 1st January 2004 for $800,000. The property was depreciated at 2% on a straight line basis. On 1st January 2009, it was decided to revalue the building to $1,125,000. The useful life was not revised.What is the balance on the revaluation reserve at 31st December 2009?
405000
396000
398500
325000What would be answer A or B? Here, he is not instructing anything regarding excess of depreciation policy.
Either could be correct. The question would have to tell you whether or not they decided to make the transfer.
Right sir. There is no neutral situation? Like we have in methods of depreciation (like we have to do SLM until asked for RBM specially).
It is up to the company to decide whether or not to make the transfer.
(And with depreciation questions will always make it clear whether it is straight line or reducing balance, either by saying directly or by giving the information in a way that makes it clear which.)
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