Navigation Inc. acquired an equipment on January 1, 2014 at a cost of $2,200,000 including an estimated residual value of $200,000 and twenty (20) years estimated useful life. The replacement cost of the equipment is $2,400,000 on December 30, 2017. The depreciated replacement cost declined to $1,470,000 after two years. If there is a need to gross up, round off percentage to whole number and to nearest dollar. Questions: 1. What is the carrying amount of the equipment on December 31, 2020? 2. What is the balance of the revaluation surplus immediately after revaluation?
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.
Navigation Inc. acquired an equipment on January 1, 2014 at a cost of $2,200,000 including an estimated residual value of $200,000 and twenty (20) years estimated useful life. The replacement cost of the equipment is $2,400,000 on December 30, 2017. The
Questions:
1. What is the carrying amount of the equipment on December 31, 2020?
2. What is the balance of the revaluation surplus immediately after revaluation?
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