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.
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 :-)