On 1/1/2015 IMAR Co. has equipment with an initial cost of $200,000 with useful life of 10 years with zero residual value, and the company decide to use straight line method to depreciate this equipment. On 31/12/2019 the company recorded the depreciation entry, and at the same date the fair value of the equipment estimated to be $115,000 by independent experts. On 31/12/2020 the company estimated the equipment again with fair value of $85,000. Required: Compute the amount of the "Revaluation Surplus" account on balance sheet on 31/12/2020.
On 1/1/2015 IMAR Co. has equipment with an initial cost of $200,000 with useful life of 10 years with zero residual value, and the company decide to use straight line method to depreciate this equipment. On 31/12/2019 the company recorded the depreciation entry, and at the same date the fair value of the equipment estimated to be $115,000 by independent experts. On 31/12/2020 the company estimated the equipment again with fair value of $85,000. Required: Compute the amount of the "Revaluation Surplus" account on balance sheet on 31/12/2020.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 7RE: Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of...
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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.
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On 1/1/2015 IMAR Co. has equipment with an initial cost of $200,000 with useful life of 10 years with zero residual value, and the company decide to use straight line method to depreciate this equipment. On 31/12/2019 the company recorded the depreciation entry, and at the same date the fair value of the equipment estimated to be $115,000 by independent experts.
On 31/12/2020 the company estimated the equipment again with fair value of $85,000.
Required: Compute the amount of the "Revaluation Surplus" account on balance sheet on 31/12/2020.
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