question archive Light Company bought a machine for ?300,000 on January 1, 20x8
Light Company bought a machine for ?300,000 on January 1, 20x8
Subject:AccountingPrice:3.87 Bought7
Light Company bought a machine for ?300,000 on January 1, 20x8. The machine's useful life is 10 years and it is estimated to have a zero residual value and is depreciated using the straight-line method.
The revalued amount of the machine is as follows:
December 31 Fair values of the machine
20x8 ? 360,000
20x9 335,000
2x10 320,000
The enacted tax rate was 30% for each year
1. The revaluation surplus in the equity section of Light Company's December 31, 20x8 statement of financial position is
a. 60,000
b. 90,000
c. 39,000
d. 63,000
2. The amount of depreciation expense to be recognized in 20x9 is
a. 32,500
b. 36,000
c. 40,000
d. 42,500
3. The amount of revaluation surplus transferred to retained earnings in 20x9 is
a. 6,667
b. 7,000
c. 4,333
d. 10,000
4. The revaluation surplus in the equity section of Light Company's December 31, 2x10 statement of financial position is
a. 77,000
b. 110,000
c. 123,443
d. 109,500
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Answer:
1. b. 90,000
2. c. 40,000
3. d. 10,000
4. b. 110,000
Step-by-step explanation
1. The revaluation surplus in the equity section of Light Company's December 31, 20x8 statement of financial position is
b. 90,000
= 360000 - (300000 - 30000 depreciation for the year)
2. The amount of depreciation expense to be recognized in 20x9 is
c. 40,000
= 360000 (Revalued amount) / 9 (useful life remaining)
3. The amount of revaluation surplus transferred to retained earnings in 20x9 is
d. 10,000
= 90000 (Surplus) / 9 (Useful life)
4. The revaluation surplus in the equity section of Light Company's December 31, 2x10 statement of financial position is
b. 110,000
Had asset not been revalued, closing balance as on December 31,2x10 would have been = 300,000/10 * 7 = 210000
Now, asset has been revalued at 320,000 as on December 31,2x10. Thus, revaluation reserve = 320000 - 210000 = 110,000
Answer is b 110,000
