Question

A building costing $100,000 on which depreciation of $20,000 has been charged is to be revalued to $150,000. Show the double entry to record the revaluation and make the postings to the ledger accounts.

Answer 1

A building's value is revalued from $100,000 to $150,000, requiring accounting entries to adjust the asset value, eliminate accumulated depreciation, and record the surplus in equity.

Step-by-step explanation:

The question pertains to the revaluation of an asset on a business’s books, which is an accounting transaction in the ledger accounts. Here is how the double entry to record the revaluation of a building might appear:

• Dr. Building (asset account) $50,000
• Cr. Accumulated Depreciation $20,000
• Cr. Revaluation Surplus (equity account) $30,000

After the revaluation, the building would be recorded at its new value of $150,000 ($100,000 original cost minus $20,000 accumulated depreciation plus $70,000 revaluation increase), the accumulated depreciation would be eliminated, and the increase in value over the original cost ($50,000) would be recorded in equity as a revaluation surplus. The postings to the ledger accounts would reflect these entries to properly represent the asset's new value on the balance sheet.