ACCA FR · Chapter 2 · Question 2 of 11
Tern Co bought a building on 1 January 20X1 for $500,000 and gave it a useful life of 50 years with no residual value. Tern Co uses the revaluation model, and on 1 January 20X6 the building was revalued to $630,000. The remaining useful life is unchanged. What revaluation surplus arises, and what is the depreciation charge for 20X6?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Surplus $180,000; depreciation $14,000
Explanation
Carrying amount at 1 January 20X6 = $500,000 - ($10,000 x 5) = $450,000. Revaluation surplus = $630,000 - $450,000 = $180,000, recognised in OCI. The revalued amount is depreciated over the remaining 45 years: $630,000 / 45 = $14,000.
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