ACCA FR · Chapter 2 · Question 3 of 11
Continuing the Tern Co building (revalued to $630,000 on 1 January 20X6, giving a surplus of $180,000 and a remaining life of 45 years), Tern Co transfers the excess depreciation from the revaluation surplus to retained earnings each year. What is the annual transfer?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $4,000
Explanation
Excess depreciation = depreciation on revalued amount - depreciation on historical cost = $14,000 - $10,000 = $4,000. You get the same figure from surplus / remaining life = $180,000 / 45 = $4,000. The transfer is made within equity and does not go through profit or loss or OCI.
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