Credit Corp Ltd. purchases a building on July 1, 2019, for $500,000. The building is expected to have a useful life of twenty years with no residual value (straight line). The company uses the revaluation model for this class of asset and will obtain current valuations every two years. On 30 June, 2021, an appraisal on the building is conducted and its fair value is determined to be $490,000. On 30 June 2023, the building is again appraised, and this time the fair value is determined to be $390,000. Required: Provide journal entries to account for the two revaluations
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.
- Credit Corp Ltd. purchases a building on July 1, 2019, for $500,000. The building is expected to have a useful life of twenty years with no residual value (straight line). The company uses the revaluation model for this class of asset and will obtain current valuations every two years. On 30 June, 2021, an appraisal on the building is conducted and its fair value is determined to be $490,000. On 30 June 2023, the building is again appraised, and this time the fair value is determined to be $390,000.
Required:
Provide
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