Question

Reval Inc. prepares financial statements in accordance with IFRS and

has elected to use the revaluation model to account for its buildings. Reval Inc. acquired a building on January 1, 20x3 for $300,000. At that time it estimated the useful life of the building to be 60 years, with no residual value. It is now January 1, 20x3. The carrying amount of the building is $275,000 $#300,000- (5 x $5,000)). Reval Inc. has obtained an appraisal valuing the building at $385,000. 1) Show the accounting entries to recognzie the revaluation and corresponding depreciation in 20x3. 2) Show the balances on the building and revaluation surplus accounts at December 31, 20x3.

Answer 1

Journal Entries:

S.No	Date	Account & Explanation	Debit($)	Credit($)
1	01-jan-20x3	Buildings	110,000
		To Revaluation reserve/Surplus		110,000
		(Revaluation of Buildings(385000-275000)
2	31-Dec-20x3	Depreciation(385000/55)	7000
		To Buildings		7000
		(Depreciation provided on the revalued amount of the building)

Balance of building as on 31 - Dec - 20X3 = 385000 - 7000 = $ 378,000

Balance of Revaluation surplus = $ 110,000