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Hi John,
I hope I am not being too cheeky in asking for help with a revision kit question.
This if from the BPP kit:At 31 Dec 20X3 Q, a limited liability company, owned a building that had cost $ 800 000 on 1 Jan 20W4( bit confused by the use of the w here).
It was depreciated at 2% per year.
On 31 December 20X3 a revaluation to $1000000 was recognised. At this date the building had a remaining useful life of 40 years.
What is the balance on the revaluation surplus at 31 December 20×3?
The answer given is $360 000 but I ‘m not sure how they got there. Please help.
Thank you
SarahStudy books often use letters (such as W and X) instead of real years.
Just like 2020 is the year after 2019, then 20X0 is the year after 20W9 (because X is the letter after W in the alphabet).So……since the building was bought on 1 Jan 20W4, then by 31 Dec 20X3 it will have been depreciated for 10 years.
Therefore the written down value at 31 Dec 20X3 will be 800,000 – (10 x 2% x 800,000) = 640,000.
It is then revalued to 1,000,000, so the surplus on revaluation is 1,000,000 – 640,000 = 360,000.
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