ACCA Applied Knowledge · Financial Accounting · Depreciation
Delta Co bought a building on 1 January 20X1 for $500,000 with a 50-year life and nil residual value, using the straight-line method. On 1 January 20X6 it was revalued to $540,000, with the remaining life unchanged. What is the revaluation surplus credited on 1 January 20X6?
The surplus is $90,000. The building's carrying amount at the revaluation date is cost $500,000 less five years of depreciation at $10,000, which is $450,000. The revalued amount of $540,000 exceeds this by $90,000.
- A$40,000
- B$90,000Correct
- C$50,000
- D$140,000
Explanation
Annual depreciation is $500,000/50 = $10,000. After 5 years accumulated depreciation is $50,000, so the carrying amount is $450,000. Surplus = $540,000 - $450,000 = $90,000. The $40,000 option wrongly compares the revalued amount with cost.
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