Lian Company acquired a building on January 1, 2001 at a cost of P50,000,000. Thebuilding has an estimated life of 10 years and residual value of P5,000,000. Thebuilding was revalued on January 1, 2005 and the revaluation revealed replacementcost of P80,000,000, residual value of P2,000,000 and revised life of 12 years. What isthe revaluation surplus on December 31, 2005?
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.
Lian Company acquired a building on January 1, 2001 at a cost of P50,000,000. Thebuilding has an estimated life of 10 years and residual value of P5,000,000. Thebuilding was revalued on January 1, 2005 and the revaluation revealed replacementcost of P80,000,000, residual value of P2,000,000 and revised life of 12 years. What isthe revaluation surplus on December 31, 2005?
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