question archive Carla Ltd purchased a building on January 1, 2018 for $14,880,000
Carla Ltd purchased a building on January 1, 2018 for $14,880,000
Subject:AccountingPrice:2.86 Bought8
Carla Ltd purchased a building on January 1, 2018 for $14,880,000. Carla accounted for this asset using the revaluation model and revalued the building every two years. The building was estimated to have a useful life of 30 years with no residual value, and Carla used straight-line depreciation. On December 31, 2019, the building had a fair value of $14,056,000. On December 31, 2021, the building had a fair value of $12,788,200.
Prepare the journal entries on the books of Carla Ltd. to revalue the building on December 31, 2019 and December 31, 2021 using the asset adjustment method.
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FORMULAS:
DEC.31, 2019
Depreciation expense = purchase value of asset/no. of useful years
DEC. 31, 2019
Revaluation surplus = Fair Value of asset - (purchased value of asset - depreciation expense in year 1 - Depreciation exp. in year 2
DEC.31, 2021
Depreciation expense = Fair value of asset / no. of useful years
Dec. 31, 2021
Cost of Building in Dec. 31, 2021 = (Fair value - Depreciation expense) - Fair value in 2021
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