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I am confused on question 8.5. I hope you can help ! I tried to work it out but not able to see how they have done it. Thanks John !
yea same i didnt get the part where we find out the total expected life before revaluation.
Given that the building was being depreciated at 2% per year, it must have originally had a useful life of 1005/2% = 50 years.
At the date of revaluation the question says that the remaining useful life is 40 years, so it must have been owned so far for 10 years.
Therefore the NBV at the date of the revaluation was 800,000 – (10 x 2% x 800,000) = $640,000.
So the surplus on revaluation is 1,000,000 – 640,000 = $360,000 and the depreciation charge is 1,000,000 / 40 = $25,000
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