ACCA FR CBE Practice Question Klopp (Revaluation of PPE)

Hi Mr.Chris

“The company’s land and buildings were revalued on 1 July 20X7. The land had cost $500,000 and the buildings $5,000,000 on 1 July 20X2. The buildings were being depreciated over 50 years and the building’s economic life remains unchanged. At 1 July 20X7, the land had a fair value of $600,000 and the buildings had a fair value of $5,400,000. Klopp Co wishes to make the annual transfer between the revaluation reserve and retained earnings.”

I believe that revaluation reserve calculation in the question is wrong.

Please correct me if below calculation wrong!

As of 01.07.20X7

Carrying Value of building 5,000,000-(5,000,000/50*5) = $ 4,500,000.00
Carrying Value of land = $ 500,000.00

Revaluation
Building (5,400,000 – 4,500,000) = $ 900,000.00
Land (600,000 – 500,000) = $ 100,000.00

Revaluation surplus = $ 1,000,000.00

Depreciation for the period (5,400,000/45) = $ 120,000.00
Reserve transfer (4,500,000/45) – 120,0000 = $ 20,000.00