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- This topic has 4 replies, 3 voices, and was last updated 9 years ago by John Moffat.
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- March 29, 2015 at 12:00 am #239355
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 $34,000Ans: 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.March 29, 2015 at 4:49 am #239362Hi
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=136,000Hope this help!
March 29, 2015 at 8:10 am #239379Selha is correct
March 29, 2015 at 2:56 pm #239416Thank you Seiha and John.
March 29, 2015 at 8:09 pm #239453You are welcome 🙂
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