On January 1, 2015, Grape Company purchased a new building at a cost of P3,000,000. Depreciation was computed on the straight line basis at 4% per year. On January 1, 2020, the building was revalued at a fair value of P4,000,000. To record the revaluation, the following journal entry was made. Building Retained earnings 1,000,000 1,000,000 Required: a. What journal entry should have been made to record the revaluation? b. What journal entry is necessary to correct the accounts? c. Prepare journal entry for the subsequent annual depreciation.

On January 1, 2015, Grape Company purchased a new building at a cost of P3,000,000. Depreciation was computed on the straight line basis at 4% per year. On January 1, 2020, the building was revalued at a fair value of P4,000,000. To record the revaluation, the following journal entry was made. Building Retained earnings 1,000,000 1,000,000 Required: a. What journal entry should have been made to record the revaluation? b. What journal entry is necessary to correct the accounts? c. Prepare journal entry for the subsequent annual depreciation.

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Description: On January 1, 2015, Grape Company purchased a new buildingat a cost of P3,000,000.Depreciation was computed on the straight line basis at 4%per year.On January 1, 2020, the building was revalued at a fair valueof P4,000,000. To record the revaluatio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

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Question

On January 1, 2015, Grape Company purchased a new building
at a cost of P3,000,000.
Depreciation was computed on the straight line basis at 4%
per year.
On January 1, 2020, the building was revalued at a fair value
of P4,000,000. To record the revaluation, the following journal
entry was made.
Building
Retained earnings
1,000,000
1,000,000
Required:
a. What journal entry should have been made to record the
revaluation?
b. What journal entry is necessary to correct the accounts?
c. Prepare journal entry for the subsequent annual
depreciation.
d. Prepare journal entry for the piecemeal realization of the
revaluation surplus.

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