On January 1,2013, a new building was purchased at a cost of $30,000,000. Depreciation was computed on the straight-line basis at 4% per year. On January 1,2016, the building was appraised and was reported to have a fair value of $36,000,000 and an estimated remaining life of 15 years. This was the first revaluation made in the building since acquisition. What is the revaluation surplus recognized in the accounts at January 1,2016?
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 1,2013, a new building was purchased at a cost of $30,000,000.
What is the revaluation surplus recognized in the accounts at January 1,2016?
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