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On 1 January 20X8, Wootton has a building in its books at cost $380,000 and a carrying value of $260,000. On 1 July 20X8, the asset is revalued at $450,000 and Wootton wishes to include that valuation in its books. Wootton’s accounting policy is to depreciate buildings at 3% straight line.
The depreciation charge to the income statement for the year ended 31 Dec is:
$8,300
$11,400
$12,450
$13,500Sir, what do we do of the carrying value in this question
I assume that this is from the Kaplan Exam Kit? (I only have the BPP Revision Kit, but surely Kaplan provide answers and workings in their Exam Kit 🙂 )
The carrying value (net book value) needs changing to the 450,000 (and the profit of 190,000 goes to the revaluation reserve) and from then on the depreciation is calculated on the revalued amount.
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