question archive An asset having a cost of $200 000 and accumulated depreciation of $40 000 is revalued to $240 000 at the beginning of the year
An asset having a cost of $200 000 and accumulated depreciation of $40 000 is revalued to $240 000 at the beginning of the year
Subject:LawPrice:2.84 Bought6
An asset having a cost of $200 000 and accumulated depreciation of $40 000 is revalued to $240 000 at the beginning of the year. Depreciation for the year is based on the revalued amount and the remaining useful life of eight years. Shareholders' equity, before adjusting for the above revaluation and subsequent depreciation, is as follows:
Share capital 600 000
Revaluation surplus 90 000
Capital profits reserve 170 000
Retained earnings 140 000
Total 1 000 000
Required:
Prepare journal entries to reflect the revaluation of the asset and the subsequent depreciation of the revalued asset. Which of the equity accounts would be affected directly or indirectly by the revaluation?
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Carrying value = $160000
Increase in value of Asset= $80000
Revised Depreciation per annum = $30000
Step-by-step explanation
Carrying value = 200000- 40000
= $160000
Increase in value of Asset = 240000 - 160000
= $80000
Revised Depreciation per annum = 240000/ 8 years
= $30000
Journal Entries
a. Asset account Dr $80000
To Revolution surplus $80000
( Being journal Entry for Revolution of Asset has been recorded )
b. Depreciation Expense account Dr $30000
To Accumulated Depreciation $30000
( Being Journal Entry has ben recorded for recording depreciation expense)
Therefore, Revolution surplus will effected by the above Transactions.
