Answer & Explanation Solved by veriTed expert Rated Helpful

Answered by StephCam_00

REVALUATION SURPLUS JAN 1 2020

LAND 5,000,000.00

BUILDING 20,000,000.00

MACHINERY 5,000,000.00

EQUIPMENT 1,200,000.00

TOTAL 31,200,000.00

DEPRECIATION EXPENSE DEC REPLACEMENT

REMAINING LIFE COMPUTATION DEPRECIATION
2020 COST

NOT NOT
LAND 10,000,000.00
DEPRECIATED DEPRECIATED -

39,600,000/22
BUILDING 39,600,000.00 (25-3)=22 YEARS 1,800,000.00
years

MACHINERY 6,000,000.00 (5-3)=2 YEARS 6,000,000/2 years 3,000,000.00

EQUIPMENT 2,940,000.00 (10-3)= 7 YEARS 2,940,000/7 years 420,000.00

TOTAL 5,220,000.00

realization of surplus REVALUATION SURPLUS REMAINING LIFE COMPUTATION REVALUATION GAIN

LAND 5,000,000.00 -

BUILDING 17,600,000.00 (25-3)=22 YEARS 17,600,000/22 800,000.00

MACHINERY 2,000,000.00 (5-3)=2 YEARS 2,000,000/2 1,000,000.00

EQUIPMENT 840,000.00 (10-3)= 7 YEARS 840,000/7 120,000.00

TOTAL 1,920,000.00

DEBIT CREDIT

REVALUATION SURPLUS 6,920,000.00

REVALUATION GAIN 6,920,000.00

CREDITED TO RETAINED EARNINGS

REPLACEMENT COST AT JAN 1 2020 DEPRECIATION 2020 CARRYING AMOUNT DEC 31 2020

LAND 10,000,000.00 NO DEPRECIATION 10,000,000.00

MACHINERY 39,600,000.00 1,800,000.00 37,800,000.00

LAND 6,000,000.00 3,000,000.00 3,000,000.00

EQUIPMENT 2,940,000.00 420,000.00 2,520,000.00

TOTAL 53,320,000.00

Step-by-step explanation

STEP 1 GET THE CARRYING AMOUNT OF THE ASSET AT JAN 1 2020 ( DEPRECIATED FOR 3YEARS SINCE ASSET WAS
ACQUIRED JAN 2017)
LAND is not depreciated

Image transcription text

COMPUTATION COMPUTATION MACHINERY COST given 10,000,000.00 EQUIPMENT COST
given 3,000,000.00 (10,000,000/5 years)*3 (3,000,000/10 ACCUMULATED DEPRECIATION
years (6,000,000.00) ACCUMULATED DEPRECIATION years) *3 years (900,000.00 ... Show more

STEP 2: GET THE REPLACEMENT COST OF THE ASSETS WITH THE GIVEN % OF INCREASE

INCREASE BY
REPLACEMENT
CARRYING AMOUNT (CARRYING AMOUNT x increase COMPUTATION
COST
by %)

LAND 100% 5,000,000.00 (5,000,000+5,000,000)

5,000,000.00 10,000,000.00

building 80% 20,000,000.00 (25,000,000+20,000,000)

25,000,000.00 45,000,000.00

machinery 50% 5,000,000.00 (3,000,000+5,000,000)

10,000,000.00 15,000,000.00

equipment 40% 1,200,000.00 (3,000,000+1,200,000)

3,000,000.00 4,200,000.00

TOTAL
43,000,000.00

STEP 3: SINCE WE KNOW THE REPLACEMENT COST AND PERCENTAGE ACCUMULATED DEPRECIATION WE CAN
MULTIPLY THIS TO ASSET REPLACEMENT COST TO GET ITS UPDATE JAN 1 2020 REPLACEMENT COST

Image transcription text

COMPUTATION REPLACEMENT COST COMPUTATION REPLACEMENT COST MACHINERY
COST 15,000,000.00 EQUIPMENT COST 4,200,000.00 ACCUMULATED DEPRECIATION
15,000,000*.60 (9,000,000.00) ACCUMULATED DEPRECIATION 4,200,000*.30 (1,2... Show more

STEP 4: WE CAN SOLVE FOR REVALUATION SURPLUS NOW (COSTrREPLACEMENT COST)

Image transcription text

REPLACEMENT COST REVALUATION SURPLUS LAND 5,000,000.00 10,000,000.00
5,000,000.00 BUILDING 25,000,000.00 45,000,000.00 20,000,000.00 ACCUMULATED
DEPRECIATION (3,000,000.00) (5,400,000.00) (2,400,000.00) CARRYING AMOUN... Show more

STEP 5: IN COMPUTING DEPRECIATION FOR DEC 31 2020, WE USE THE REPLACEMENT COST AT JAN 1 2020 DIVIDE
BY THE REMAINING LIFE OF THE ASSET
land is not depreciated

Image transcription text

REPLACEMENT DEPRECIATION EXPENSE DEC 2020 COST REMAINING LIFE COMPUTATION
DEPRECIATION LAND 10,000,000.00 NOT DEPRECIATED NOT DEPRECIATED BUILDING
39,600,000.00 (25-3)=22 YEARS 39,600,000/22 years 1,800,000.00 MACHINERY 6...
Show more

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STEP 6: IN COMPUTING REVALUATION GAIN FOR DEC 31 2020, WE USE THE REVALUATION SURPLUS COST AT JAN 1
2020 DIVIDE BY THE REMAINING LIFE OF THE ASSET
land is not realized

Image transcription text

REVALUATION realization of surplus SURPLUS REMAINING LIFE COMPUTATION REVALUATION
GAIN LAND 5,000,000.00 BUILDING 17,600,000.00 (25-3)=22 YEARS 17,600,000/22
800,000.00 MACHINERY 2,000,000.00 (5-3)=2 YEARS 2,000,000/2 1,000,000.00 ... Show more

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