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CA Intermediate · Advanced Accounting · AS 10 Property, Plant and Equipment

Narmada Industries Ltd. revalues its plant on 31 March 2026. Cost Rs 50,00,000, accumulated depreciation Rs 20,00,000 (carrying amount Rs 30,00,000), remaining life 6 years. Fair value is Rs 42,00,000. Depreciation is straight-line with nil residual value. Assuming the company adopts revaluation and the revalued amount is depreciated over the remaining life, what is the depreciation for the next year, and what is the effect on carrying amount?

Depreciation for the next year is Rs 7,00,000 and the revaluation surplus is Rs 12,00,000. The surplus is fair value Rs 42,00,000 less carrying amount Rs 30,00,000, and the revalued amount is depreciated over the remaining six years.

  1. ARs 5,00,000; revaluation surplus Rs 12,00,000
  2. BRs 7,00,000; revaluation surplus Rs 12,00,000Correct
  3. CRs 7,00,000; revaluation surplus Rs 22,00,000
  4. DRs 8,33,333; revaluation surplus Rs 12,00,000

Explanation

Revalued amount 42,00,000 over 6 years gives depreciation 7,00,000. Surplus = 42,00,000 - 30,00,000 = 12,00,000. Rs 5,00,000 uses the old carrying amount, a missed adjustment; Rs 22,00,000 compares with the net of cost.

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