On January 1, 2018, Bie Corp. purchased a new building at a cost of P3 million. Depreciation was computed on the straight line basis at 4% per year. On December 31, 2019, after recording the depreciation for the year, the building was appraised and was reported to have a fair value of P30 million and an estimated remaining life of fifteen years. This was the first revaluation made on the building since its acquisition. It is the company's policy to transfer a portion of the revaluation surplus to retained earnings as the asset is being used for its remaining life. What is the revaluation surplus balance reported in the financial statements at December 31, 2021?
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.
On January 1, 2018, Bie Corp. purchased a new building at a cost of P3 million.
It is the company's policy to transfer a portion of the revaluation surplus to
What is the revaluation surplus balance reported in the financial statements at December 31, 2021?
Step by step
Solved in 2 steps
