Maria Company had the following property, plant, and equipment at December 31, 2014: Cost Book Value Land 4,000,000 4,000,000 Office building 30,000,000 22,500,000 Machinery 6,000,000 3,000,000 These assets are carried under the cost model since their acquisition on January 3, 2005. The straight line method is used in computing depreciation charges. Assume that the residual value is immaterial. On January 2, 2015, Maria decided to adopt the revaluation mode. Accordingly, reputable appraisers submitted the following fair values: Land – P10,000,000 Office Building – P37,500,000 Machinery – P5,000,000 There was no change in useful life. The office building has 40 years of useful life, while machinery is being depreciated over 20 years. On January 5, 2017, the Company had these assets subjected to a second revaluation. Result of the second revaluation show the following sound values: Land – P8,000,000 Office Building – P22,750,000* Machinery – P2,000,000* Maria uses the proportional approach in recording revaluation of property, plant and equipment. In addition, revaluation surplus of depreciable assets is being transferred periodically (piecemeal realization) to retained earnings. 1) How much is the total revaluation surplus at January 2, 2015, immediately after recording the revaluation? A . 17,000,000 B. 12,500,000 C. 23,000,000 D. 11,875,000 2) How much would be total revaluation loss to be recorded on January 5, 2017? A . 400,000 B. 16,250,000 C. 3,900,000 D. 0
Maria Company had the following property, plant, and equipment at December 31, 2014:
Cost Book Value
Land 4,000,000 4,000,000
Office building 30,000,000 22,500,000
Machinery 6,000,000 3,000,000
These assets are carried under the cost model since their acquisition on January 3, 2005. The straight line
method is used in computing depreciation charges. Assume that the residual value is immaterial. On January 2,
2015, Maria decided to adopt the revaluation mode. Accordingly, reputable appraisers submitted the following
fair values:
Land – P10,000,000 Office Building – P37,500,000 Machinery – P5,000,000
There was no change in useful life. The office building has 40 years of useful life, while machinery is being
depreciated over 20 years. On January 5, 2017, the Company had these assets subjected to a second
revaluation. Result of the second revaluation show the following sound values:
Land – P8,000,000 Office Building –
P22,750,000*
Machinery – P2,000,000*
Maria uses the proportional approach in recording revaluation of property, plant and equipment. In addition,
revaluation surplus of
earnings.
1) How much is the total revaluation surplus at January 2, 2015, immediately after recording the revaluation?
A
.
17,000,000 B. 12,500,000 C. 23,000,000 D. 11,875,000
2) How much would be total revaluation loss to be recorded on January 5, 2017?
A
.
400,000 B. 16,250,000 C. 3,900,000 D. 0
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