Q: A company bought a property four years ago on 1 January for $ 170,000. Since then property prices have risen substantially and the property has been revalued at $210,000.
The property was estimated as having a useful life of 20 years when it was purchased. What is the balance on the revaluation surplus reported in the statement of financial position?
A $210,000
B $136,000
C $74,000
D $34,000
Ans: 170,000* 16/20 =136,000
Surplus is 210,000- 136,000= 74,000
My question is why we multiply by 16 rather than to multiply by 4 years.
Ask the Tutor ACCA FA
Revaluation
Hi
We multiply by 16 years because the useful life of this property remains only 16 years when revaluation.
136,000 is the carrying value of the property after 4 years of purchase.
Another way to calculate is
Accumulated depreciation for 4 years is 170,000*4/20=34,000
Carrying amount is 170,000-34,000=136,000
Hope this help!
11y ago#2Selha is correct
Thank you Seiha and John.
11y ago#4You are welcome :-)
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