A building was acquired on January 1, 2019 at an original cost of P16,000,000, with zero residual value. Depreciation is computed using Double Declining Balance Method. Useful life in years is 20 years. On December 31, 2020, the building is appraised at a fair market value of P14,460,000. The appraisal results are to be recognized in the accounts considering the same remaining life for the building. How much is the amount to be credited to revaluation surplus at December 31, 2020?
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.
A building was acquired on January 1, 2019 at an original cost of P16,000,000, with zero residual value.
On December 31, 2020, the building is appraised at a fair market value of P14,460,000.
The appraisal results are to be recognized in the accounts considering the same remaining life for the building.
How much is the amount to be credited to revaluation surplus at December 31, 2020?
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