Question

Maple Inc. owns equipment that it purchased on January 1, 2018 for $4 Million.

The following additional information is available:

Depreciation: 10-year useful life, straight line basis, no residual.

Dec 31, 2018 – Book value (after recording 2018 depreciation): $3,600,000

Dec 31, 2018 – Fair value: $4,500,000  

Dec 31, 2019 – Fair value $3,000,000

The company uses the revaluation model (asset adjustment method) to account for its property, plant and equipment.

Instructions

Assuming the entry for the current year's depreciation has already been recorded, prepare the entr(ies) at:

1. Dec 31, 2018
2. Dec 31, 2019

Answer 1

Date	Account Titles & Explanation	Debit $	Credit $
Dec.31,2018	Equipment	9,00,000
	Revaluation Surplus		900,000
	(4,500,000 - 3,600,000 )
	( To revaluation surplus )
Dec.31,2019	Depreciation Expense	500,000
	Equipment		500,000
	( 4,500,000 / 9 )
	( to depreciation Exepnse )
Dec.31,2019	Revaluation Expense-Income Statement	1,000,000
	Equipment		1,000,000
	( 4,500,000 - 500,000 ) - 3,000,000
	( to revalue equipment at fair value )