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ACCA · Question 13 · Tangible Non-Current Assets
Metro Utilities owns a headquarters building originally purchased for $2,000,000. Accumulated depreciation to date is $400,000. The company decides to revalue the building to its current market value of $2,500,000. What is the amount to be credited to the revaluation surplus? (Enter the number only, without commas or currency symbols)
Metro Utilities owns a headquarters building originally purchased for $2,000,000. Accumulated depreciation to date is $400,000. The company decides to revalue the building to its current market value of $2,500,000. What is the amount to be credited to the revaluation surplus? (Enter the number only, without commas or currency symbols)
How to approach this question
Calculate the carrying amount (Cost - Accumulated Depreciation) and subtract it from the new revalued amount.
Full Answer
Carrying amount = Cost ($2,000,000) - Accumulated Depreciation ($400,000) = $1,600,000. Revaluation Surplus = Revalued Amount ($2,500,000) - Carrying Amount ($1,600,000) = $900,000.
Common mistakes
Calculating the surplus as Revalued Amount - Original Cost ($2,500,000 - $2,000,000 = $500,000), forgetting to account for accumulated depreciation.
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