Answer 1

Simply the asset is revalued and then there is difference in amount of depreciation that is
charged on revalued amount and the depreciation that is charged on historical cost. Thus,
when we minus the depreciation charged on revalued and historical cost of asset, so that
difference of amount is called excessive depreciation. In other words, it is additional
depreciation on asset that is supposed to be charged when the depression has been
calculated historical cost basis first and then get to know about fair value.
There are two main points to be focused:
First, it is optional weather to transfer reserve from the account “revaluation surplus” to
the account “retained earnings” and also one cannot transfers if he don’t wants. Second,
excessive depreciation occurs, when there is revaluation in surplus.

Answer 2
When the cost of asset is recorded in the income statement after adjusting the
depreciation expense, it decreases net income. Companies use depreciation expense to
reduce the value of a fixed asset in accounting statements. Mostly, the fixed asset is
property, plant, and equipment. But the transfer is done directly to retain earnings in the
response of excessive depreciation. It is wrong to credit to income statement but it is
allocated in statement of changes in equity.

Answer 3
The treatment in journal entry to record the excessive depreciation would be as charge on
revalued asset, so the Profit or loss account will be debit and accumulated depreciation
account will be credit. The calculation of amount is calculated by following formula,
Excessive Depreciation = Depreciation on Revalued Amount – Depreciation On Original Cost
The journal entry for recording the transfer of reserve from “revaluation surplus’ to
‘retained earnings’ account will be by using the amount that is calculated as excessive
depreciation by formula, so debit the “revaluation surplus” account and credit the
“retained earning” account.