Recording transactions and events — ACCA Practice Question 12

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.

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?

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Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 2

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