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Revaluation

The document provides data on the revaluation of machinery, including original cost, replacement cost, accumulated depreciation, and age. It asks for calculations of appreciation, carrying amount, depreciated replacement cost, revaluation surplus, original useful life, and journal entries to record the revaluation, annual depreciation, and realization of the revaluation surplus. The solution shows the calculations and journal entries to fully address all items required by the document.

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959 views4 pages

Revaluation

The document provides data on the revaluation of machinery, including original cost, replacement cost, accumulated depreciation, and age. It asks for calculations of appreciation, carrying amount, depreciated replacement cost, revaluation surplus, original useful life, and journal entries to record the revaluation, annual depreciation, and realization of the revaluation surplus. The solution shows the calculations and journal entries to fully address all items required by the document.

Uploaded by

Artisan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

A company provided the following data pertaining to a machinery on the

date of revaluation:

Replacement
Cost cost
Machinery 7,500,000 10,500,000
Accumulated depreciation 1,500,000
Age of asset (years) 6

Required:
1. Appreciation or revaluation increase
2. Carrying amount
3. Depreciated Replacement cost
4. Revaluation surplus
5. What is the original useful life of the asset?
6. Prepare the journal entry to record the revaluation (use proportional
approach)

7. Prepare journal entry to record annual depreciation

8. Prepare journal entry to record the piecemeal realization of the


revaluation surplus
Solution

Cost Replacement cost


Machinery 7,500,000 10,500,000
Accumulated Depreciation -1,500,000 -2,100,000
CA/SV/RS 6,000,000 8,400,000
Amount
Other solutions: (if necessary)
3,000,000 Appreciation or revaluation increase = Replacement Cost
6,000,000 Carrying Amount = Cost - Accumulated Depreciation,cos
8,400,000 Depreciated Replacement Cost = Replacement Cost - Acc
2,400,000 (1,500,000/7,500,000) 20%
30 years (20% x 10,500,000)= 2,100,000 Accumulated

Machinery 3,000,000 Revaluation Surplus = Depreciated Replacement Cost - Ca


Accumulated Depreciation 600,000 Originial Useful Life = 30 years
Revaluation Surplus 2,400,000 Annual Depreciation = Accumulated Deprecia
Depreciation 350,000 Original Useful Life = Cost/Annual Depreciatio
Accumulated Depreciation 350,000

Revaluation Surplus 100,000 Original Useful Life - Age of Asset = 30-6 = 24


Retained Earnings 100,000 Depreciation on cost (6,000,000/24) + Deprec
Appreciation
3,000,000
-600,000
2,400,000

uation increase = Replacement Cost - Cost = 10,500,000 - 7,500,000 = 3,000,000


ost - Accumulated Depreciation,cost = 7,500,000 - 1,500,000 = 6,000,000
ment Cost = Replacement Cost - Accumulated Depreciation, replacement cost = 10,500,000 - 2,100,000 = 8,400,000 or 10,500,000 x 80%
0/7,500,000) 20%
,500,000)= 2,100,000 Accumulated Depreciation, replacement cost

Depreciated Replacement Cost - Carrying Amount = 8,400,000 - 6,000,000 = 2,400,000

epreciation = Accumulated Depreciation,cost/Age of Asset = 1,500,000/6years = 250,000


seful Life = Cost/Annual Depreciation = 7,500,000/250,000 = 30 years

ge of Asset = 30-6 = 24
tion on cost (6,000,000/24) + Depreciation on appreciation (2,400,000/24) = Depreciation on Revalued Amount = 250,000 + 100,000 = 3
400,000 or 10,500,000 x 80% = 8,400,000

ount = 250,000 + 100,000 = 350,000

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