Hilarious Company provided the following data pertaining to machinery on the date of revaluation: CostReplacement cost Machinery 4, 500, 000 7, 200, 000
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.
Hilarious Company provided the following data pertaining to machinery on the date of revaluation:
CostReplacement cost
Machinery 4, 500, 000 7, 200, 000
Age of asset 3 years
Revised Life of the asset 10 years
Required:
- Appreciation or revaluation increase
- Carrying amount
- Depreciated replacement cost
- Revaluation surplus
- What is the original life of the asset?
- Prepare the
journal entry to record the revaluation - Prepare the entry to record the annual depreciation subsequent to revaluation
- Prepare the entry to record the piecemeal realization of the revaluation surplus
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