An asset having a cost of $200 000 and accumulated depreciation of $40 000 is revalued to $240 000 at the beginning of the year. Depreciation for the year is based on the revalued amount and the remaining useful life of eight years. Shareholders’ equity, before adjusting for the above revaluation and subsequent depreciation, is as follows: Share capital600 000Revaluation surplus90 000Capital profits reserve170 000Retained earnings140 000Total1 000 000 Required:Prepare journal entries to reflect the revaluation of the asset and the subsequent depreciation of the revalued asset. Which of the equity accounts would be affected directly or indirectly by the revaluation?

From the given information, Written down value = $200000 - $40000 = $160,000 Revaluation surplus =…

Answered: An asset having a cost of $200 000 and…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges

Section: Chapter Questions

Problem 1BD

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An asset having a cost of $200 000 and accumulated depreciation of $40 000 is revalued to $240 000 at the beginning of the year. Depreciation for the year is based on the revalued amount and the remaining useful life of eight years. Shareholders’ equity, before adjusting for the above revaluation and subsequent depreciation, is as follows:

Share capital	600 000
Revaluation surplus	90 000
Capital profits reserve	170 000
Retained earnings	140 000
Total	1 000 000

Required:

Prepare journal entries to reflect the revaluation of the asset and the subsequent depreciation of the revalued asset. Which of the equity accounts would be affected directly or indirectly by the revaluation?

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