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revaluation surplus

KKathyn4y ago
Banjo Co. purchase a building on 30 June 20X8 for $1250,000. At acquisition, the useful life of the building was 50years. Depreciation is calculated on the straight line basis. 10years later, on 30 June 20Y8 when the carrying amount of the building was $1,000,000, the building was revaluated to $1,600,000. Banjo Co. has a policy of transferring the excess depreciation on revaluation from the revaluation surplus to retained earnings. Assuming no further revaluation take place, what is the balance on the revaluation surplus at 30June 20Y9? Answer is $585,000 I don't know why the revaluation surplus at 30June 20Y9 doesnt less the depreciation charge in 20y9
John MoffatJohn MoffatTutor4y ago#1
It is the excess depreciation that is transferred from the revaluation surplus to the retained earnings. The original depreciation before the revaluation was 1,250,000/50 = $25,000 per year. The new depreciation on the revalued amount is 1,600,000/40 = $40,000 per year. Therefore the excess depreciation is 40,000 - 25,000 = $15,000. So the balance on the revaluation account is 600,000 - 15,000 = $585,000.
DMDisha mehta4y ago#2
Johnson, a limited liability company, has provided the following information: Building cost $780,000 Accumulated depreciation $540,000 The company decided to revalue the building to $500,000. What is the double entry to record the above transaction? A Dr Accumulated depreciation $540,000 Cr Building cost $280,000 Cr Revaluation reserve $260,000 B Dr Revaluation deficit $280,000 Cr Building cost $280,000 C Dr Building cost $260,000 Cr Revaluation reserve $260,000 D Dr Building cost $280,000 Dr Revaluation reserve $260,000 Cr Accumulated depreciation $540,000 Sir the answer here is A Shouldn't the entry be like Dr. Non current Dr. Accumulated depriciation Cr. Revaluation surplus Sir I am not able to understand the answer entry? Nor the answer
John MoffatJohn MoffatTutor4y ago#3
When they revalue, the accumulated depreciation is removed (so Dr Accumulated depreciation and credit revaluation reserve), and the cost of the asset is changed to the new value (so Cr the building cost to reduce it to the new value and Dr the revaluation reserve). And, it 'works'. At the moment the net book value is 240,000. The new value is 500,000. So the surplus on revaluation is the difference of 260,000. Have you watched my free lectures on this? :-)
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