Valix Finacc vol 1 Problem 19-5

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 19 Problem 19-5

Proportional approach

1. Building                                                                                            3,000,000

            Accumulated depreciation                                                                               750,000

            Revaluation surplus                                                                                         2,250,000

2. Depreciation (8,000,000 / 40) or (6,000,000 / 30)                                 200,000

            Accumulated depreciation                                                                               200,000

    Gross replacement cost (6,000,000 / 75%)  8,000,000

3. Revaluation surplus                                                                             75,000

            Retained earnings (2,250,000 / 30)                                                                        75,000

Elimination approach

1. Accumulated depreciation                                                 1,250,000

            Building                                                                                                            1,250,000

    Building (6,000,000 – 3,750,000)                                                        2,250,000

            Revaluation surplus                                                                                         2,250,000

2. Depreciation (6,000,000 / 30)                                                              200,000

            Accumulated depreciation                                                                               200,000

3. Revaluation surplus                                                                              75,000

            Retained earnings                                                                                               75,000