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Use for questions 21 and 22 -- Franco Company uses IFRS and owns a piece of...

Use for questions 21 and 22 -- Franco Company uses IFRS and owns a piece of property, plant and equipment that has a historical cost of 5,000,000. At December 31, 2011, the company reported a valuation reserve of 8,365,000 on all assets subject to revaluation. At December 31, 2012, the property, plant and equipment above was appraised at 5,325,000. 22. The valuation reserve at December 31, 2012 will be reported at:A. 8,040,000 on the Statement of Stockholders' Equity.B. 8,690,000 in the assets section of the Balance Sheet.C. 8,690,000 in the stockholders' equity section of the Balance Sheet.D. 325,000 on the Income Statement.

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Answer #1

22.) $ 8690000 in the stockholders equity section of the balance sheet.

Explanation.

Revaluation of fixed assets is the process which carrying value of fixed assets adjust upward Or downward in response with major change in it's fair market value.Revaluation is allowed under IFRS framework. Under revaluation model it allows both upward and downward adjustment in the value of assetsassets, and the amount should be adjust in the valuation reserve account.

Here opening balance in valuation reserve account= $ 8365000

Upward revaluation amount= $ 5325000 - $ 5000000 = $ 325000

Valuation reserve balance at December 31,2012 = $ 8365000+$ 325000 = $ 8690000

Valuation reserve shown under the stakeholders equity section of the balance sheet. so there will be a balance of $ 8690000 in valuation reserve account at December 31,2012.

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