On January 1, 2023, Stigman Company purchased building at a cost of P10,000,000 with a 10-year useful life and no residual value. The entity used the straight line depreciation method. On January 1, 2025, the entity decided to use revaluation model and it was determined that the fair value of the equipment on this date is P12,000,000. The income tax rate is 30%. What is included in the entry to record the revaluation on January 1, 2025? A. Debit accumulated depreciation P1,000,000 B. Debit deferred tax liability P1,200,000 C. Credit revaluation surplus P5,000,000 D. Credit revaluation surplus P2,800,000
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.
On January 1, 2023, Stigman Company purchased building at a cost of P10,000,000 with a 10-year useful
life and no residual value. The entity used the
entity decided to use revaluation model and it was determined that the fair value of the equipment on this
date is P12,000,000. The income tax rate is 30%. What is included in the entry to record the revaluation on
January 1, 2025?
A. Debit
B. Debit
C. Credit revaluation surplus P5,000,000
D. Credit revaluation surplus P2,800,000
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