Samson Company applies revaluation accounting to plant assets with a carrying value of P800,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of P750,000. The journal entry to adjust the plant assets to fair value and record revaluation surplus in year one will include a; Select one: a. credit to Plant Assets for P150,000. b. credit to Depreciation Expense for P150,000. c. debit to Accumulated Depreciation for P50,000. d. credit to Revaluation Surplus for P150,000.
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.
Samson Company applies revaluation accounting to plant assets with a carrying value of P800,000, a useful life of 4 years, and no salvage value.
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