ExpertHard2 marksMultiple Choice
ACCA · Question 12 · Recording transactions and events
A property was purchased for $200,000 and has accumulated depreciation of $40,000. The company decides to revalue the property to its current market value of $250,000. What is the correct double entry to record the revaluation?
A property was purchased for $200,000 and has accumulated depreciation of $40,000. The company decides to revalue the property to its current market value of $250,000. What is the correct double entry to record the revaluation?
Answer options:
A.
Dr Property Cost $50,000, Cr Revaluation Surplus $50,000
B.
Dr Property Cost $50,000, Dr Accumulated Depreciation $40,000, Cr Revaluation Surplus $90,000
C.
Dr Revaluation Surplus $90,000, Cr Property Cost $50,000, Cr Accumulated Depreciation $40,000
D.
Dr Property Cost $90,000, Cr Revaluation Surplus $90,000
How to approach this question
When revaluing an asset, you must restate the cost to the new valuation and eliminate any existing accumulated depreciation. The net increase is the revaluation surplus.
Full Answer
B.Dr Property Cost $50,000, Dr Accumulated Depreciation $40,000, Cr Revaluation Surplus $90,000✓ Correct
Carrying amount = $200,000 - $40,000 = $160,000. Revalued amount = $250,000. Revaluation surplus = $250,000 - $160,000 = $90,000. To achieve this, increase the cost account by $50,000 (Dr), eliminate the accumulated depreciation of $40,000 (Dr), and credit the Revaluation Surplus with $90,000.
Common mistakes
Only recording the difference between the old cost and new valuation ($50k) and forgetting to clear the accumulated depreciation.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
65 questions · hints · full answers · grading
More questions from this exam
Q01BioGenix Ltd, a biotech startup, is deciding whether to disclose a highly uncertain contingent li...EasyQ02Which of the following bodies is primarily responsible for issuing International Financial Report...EasyQ03Which of the following are the primary responsibilities of the directors of a limited liability c...MediumQ04Titanium Forge Co, a heavy manufacturing firm, recently incurred the following costs:
1. $50,000 ...MediumQ05A company makes a 1 for 4 bonus issue of shares. The nominal value of the shares is $1. The compa...Medium