On January 1, 2013, Raven Company acquired a building at cost of P 5 000 00. The building has been depreciated on the basis of a 20 – year life. On January 1, 2018, an appraisal of the building showed replacement at P 8 000 000 with no change in useful life. 1. Before income tax, what amount should be credited to revaluation surplus on January 1, 2018? 2. What is the depreciation for 2018? 3. What is the revaluation surplus that should be reported in the December 31, 2018 statement of financial position?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On January 1, 2013, Raven Company acquired a building at cost of P 5 000 00. The building has been
On January 1, 2018, an appraisal of the building showed replacement at P 8 000 000 with no change in useful life.
1. Before income tax, what amount should be credited to revaluation surplus on January 1, 2018?
2. What is the depreciation for 2018?
3. What is the revaluation surplus that should be reported in the December 31, 2018
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