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Hi.. I’m stumped on how to calculate the revaluation for the accumulated depreciation for working No.2 ( The Property, Plant & Equipment Calculation) . Please help me understand how to calculate this . I went through the whole study text to figure it out but to no success.
Relevant Information:
Land & Building at cost (land element : $163000)
Buildings Accumulated Depreciation at 1 Jan 20X3 : $60000The building had an estimated useful life of 40 years when built, and are being depreciated on a straight line basis. The directors wish to incorporate a revaluation of the land and buildings as at 31 Dec 20X3, when the fair value of the land is $250000 and the fair value of the building is $150000.
This question is from the Kaplan ST Appendix 1 – Test Your Understanding 4
Thank you!
OK, let’s guide you through it step by step.
When the asset is revalued we DR Cost DR Acc Depn CR Revaluation (OCI). The debit entry to accumulated depreciation removes the balance in full, reducing it to zero. We then depreciate the revalued amount over the remaining useful life. So, what is the revalued amount? What is the remaining life? You can then use these two to work out the new depreciation charge.
Have a go and see if you can work things out. Let me know how you get on and we can move on to the next steps if required.
Thanks
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