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The following information of Premium Co is available for the year ended 31 October 20X2:
Cost as at 1 November 20X1 $102,000
Accumulated depreciation as at 1 November 20X1. $20,400
On 1 November 20X1, P Co revalued the property to $120,000. Premium Co accounting policy is to charge depreciation on a straight-line basis over 50 years. On revaluation there was no change to the overall useful life. It has also chosen to make the annual transfer of excess depreciation on revaluation in equity.
What should be the balance on the revaluation surplus and the depreciation charge as shown in Premium Co financial statements for the year ended 31 October 20X2?
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On the date of the revaluation the surplus of $38,400 will be transferred to the revaluation reserve.
As at the following 31 October, the difference between the depreciation on the revalued amount (spread over the remaining life of 40 years) and the depreciation if there had been no revaluation ( 2,040 a year) is transferred from the revaluation reserve to retained earnings.
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