Banjo Co Purchased a building on 30 June X8 for $2,500,000.
At acquisition, the useful life of the building was 50 years. Depreciation is calculated on the straight-line basis. 10 years later, on 30 June Y8 when the carrying amount of the building was $2,000,000. The building was revalued to $3,000,000. Banjo Co has a policy of transferring the excess depreciation on revaluation from the revaluation surplus to retained earnings. Assuming no further revaluations take place, what is the balance on the revaluation surplus at 30 June 20Y9?
Suggested Solution:
| Building Cost | 2,500,000 |
| Annual Depreciation expenses | 50,000 |
| Acc Depreciation expenses after ten years | 500,000 |
| Carrying Value | 2,000,000 |
| Revaluation on 30 June Y8 | 3,000,000 |
| Revaluation Surplus | 1,000,000 |
| Life remained | 40 years |
| Yearly Depreciation after revaluation | 75,000 |
| Additional Yearly Depreciation after revaluation | 25,000 |
| Revaluation Surplus on 30 June Y9 | 975,000 |