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Revaluation-Accounting Compress
Revaluation-Accounting Compress
1. Statement 1: When property, plant and equipment are revalued, the entire class should be
revalued.
Statement 2: The assets within a class of property, plant and equipment are revalued
simultaneously in order to meet selective revaluation of assets and the reporting of amounts
which are a mixture of cost and value at different dates.
a. True:False c. True:True
b. False:True d. False:False
4. Statement 1: The frequency of revaluation depends upon the changes in cost of property,
plant and equipment being revalued.
Statement 2: When the fair value of a revalued asset differs materially from the carrying
amount, no further revaluation is necessary.
a. True:False c . False:True
b. False:False d. True:True
6. Statement 1: Carrying amount is equal to historical cost plus the corresponding accumulated
depreciation.
Statement 2: Fair value is the current purchase price of the property, plant and equipment.
Statement 3: Replacement cost is the price that would be received to sell an asset.
a. True:False:True c. False:True:True
b. False:True:False d. False:False:False
7. After recognition as an asset, an item of property, plant and equipment whose fair value can
be measured reliably can be carried at:
a. Historical Cost c. Carrying amount
b. Replacement Cost d. Answer not given
8. The fair value or depreciated replacement cost minus the carrying amount of the property,
plant and equipment.
a. Revaluation increment c. Sound Value
b. Replacement cost d. Carrying amount
12. The revaluation surplus is allocated or realized over the remaining useful life of the asset and
reclassified through __________?
a. Income c. Share capital
b. Retained earnings d. Share premium
13. Initially, an item of property, plant, and equipment that qualifies for recognition shall be
measured at:
a. Fair value c. cost
b. Fair value less transaction costs d. present value
14. After recognition, an entity shall choose either_____ as an accounting policy and shall apply
that policy in an entire class of property, plant, and equipment:
a. Cost Model/ Revaluation Model c. Revaluation Model/ Fair Value Model
b. Cost Model/ Fair Value Model d. Revaluation Model/ Impairment Model
18. I- When property, plant, and equipment are revalued, the entire class of property, plant, and
equipment should be revalued
II- The assets within a class of property, plant, and equipment are revalued retroactively
in order to avoid selective revaluation of assets
a. Statement I is only true c. Both statements are true
b. Statement II is only true d. Both statements are false
19. The revalued amount of property, plant, and equipment is based on the following except:
a. Fair Value c. Net Realizable Value
b. Depreciated replacement cost d. Answer not given
20. It is the fair value or depreciated replacement cost of the item of property, plant, and
equipment?
a. Fair Value c. Revalued amount
b. Depreciated replacement cost d. Net Realizable Value
21. If the elimination approach is applied in recording the revaluation, what is the correct journal
entry to offset the gross carrying amount of the machinery?
a. Debit Accumulated Depreciation c. Credit Accumulated Depreciation
b. Debit PPE d. Credit PPE
22. Among the approaches in recording the revaluation, what is the preferable method?
a. Fair Value Approach c. Elimination Approach
b. Proportional Approach d. Cost Approach
23. It is the current “purchase price” of the property, plant, and equipment
a. Depreciated replacement cost c. Revaluation surplus
b. Carrying amount d. Replacement cost
24. It is equal to the fair value or depreciated replacement cost minus the carrying amount of
PPE.
a. Depreciated replacement cost c. Revaluation surplus
b. Carrying amount d. Replacement cost
Useful life
Building (5 years expired/25%) 20 years
Machinery (5 years expired/50%) 10 years
Sound Value Carrying amount Revaluation Surplus
Land 10,000,000 5,000,000 5,000,000
Building (3,500,000 x.75) 26,250,000 22,500,000 3,750,000
Machinery (6,000,000x.50) 3,000,000 2,000,000 1,000,000
P9,750,000
Question 19
Revaluation surplus – Jan.1, 2017 9,750,000
Piecemeal realization in 2017:
Building (3,750,000/15) 250,000
Machinery (1,000,000/5) 200,000 (450,000)
Revaluation surplus- Dec.31, 2017 P9,300,000
For questions 20-22
On January 1, 2019, Iniwan Co, owned an equipment costing P7, 700,000 with residual
value of P700,000. The life of the asset is 10 years and was depreciated using the straight line
method. On such date, the equipment has a replacement cost of P11, 000,000 with a residual
value of P500, 000 and the age of the asset is 4 years. The appraisal of the equipment showed a
total revised useful life of 12 years and the entity decided to carry the equipment at revalued
amount.
20. What amount should be reported as pretax revaluation surplus on January 1, 2019?
a. 1,900,000 c. 2,100,000
b. 1,800,000 d. 2,000,000
21. What amount should be reported as pretax revaluation surplus on December 31, 2019?
a. 1,662,500 c. 1,862,500
b. 1,762,500 d. 1,962,500
25. What amount should be recognized as pretax revaluation surplus on December 31, 2015?
a. 52,500,000 c. 47,500,000
b. 42,500,000 d. 63,500,000
Solution for 7-9
Question 7
Sound Value Carrying amount Revaluation surplus
Land 50,000,000 25,000,000 25,000,000
Building 120,000,000 80,000,000 40,000,000
Total 170,000,000 105,000,000 P65, 000,000
Question 8
Percentage of accumulated depreciation (20,000,000/100,000,000) 20%
Remaining useful life (80% x 20 years) 16 years
Subsequent annual depreciation (120,000,000/16 years) P7,500,000
Question 9
Revaluation surplus – January 1, 2015 65,000,000
Realization of revaluation surplus on building (40,000,000/16years) ( 2,500,000)
Revaluation surplus – December 31, 2015 P62,500,000