Hilarious Company
Required 1
Annual depreciation on cost (900,000/3 years) 300,000
Original life (4,500,000/300,000) or (3 years / 20 %) 12 years
Required 2
Machinery 2,700,000
Accumulated depreciation 540,000
Revaluation surplus 2,160,000
Appreciation (7.200,000-4,500,000) 2,700,000
Carrying amount (4,500,000-900,000) 3,600,000
Depreciated replacement cost (7,200,000 x 80%) 5,760,000
Revaluation surplus (5,760,000 3,600,000) 2,160,000
Required 3
Depreciation (5,760,000/12) 480,000
Accumulated depreciation 480,000
Original cost (3.600,000/12) 300,000
Appreciation (2,160,000/12) 180,000
480,000
Required 4
Revaluation surplus (2,160,000/12) 180,000
Retained earnings 180,000
Incognito Company
Required 1
Annual depreciation on cost (750,000/5) 150,000
Original life (3,000,000/150,000) or (5 years/25%) 20 years
Percentage of accumulated depreciation (750,000/3,000,000) 25%
Required 2
Equipment 1,800,000
Accumulated depreciation (25 % x 1,800,000) 450,000
Revaluation surplus 1,350,000
Required 3
Depreciation (3,600,000/15) 240,000
Accumulated depreciation 240,000
Required 4
Revaluation surplus 90,000
Retained earnings (1,350,000/15) 90,000
Maroon Company
Required1 Debit Credit
Proportional Approach
Building (8,000,000-5,000,000) 3,000,000
Accumulated depreciation (25 % x 3,000,000) 750,000
Revaluation surplus 2,250,000
Depreciation (8,000,000/40) or (6,000,000/30) 200,000
Accumulated depreciation 200,000
Gross replacement cost (6,000,000/75%) = 8,000,000
Revaluation surplus 75,000
Retained earnings (2,250,000/30) 75,000
Required2
Elimination approach
Accumulated depreciation 1,250,000
Building 1,250,000
Building (6,000,000 3,750,000) 2,250,000
Revaluation surplus 2,250,000
Depreciation (6,000,000/30) 200,000
Accumulated depreciation 200,000
Revaluation surplus 75,000
Retained earnings 75,000
Notorious Company
Required1 Debit Credit
Equipment 2,700,000
Accumulated depreciation 500,000
Revaluation surplus 2,200,000
Depreciation (7,500,000/10) 750,000
Accumulated depreciation 750,000
Revaluation surplus (2,200,000/10) 220,000
Retained earnings 220,000
Required2
Cash 8,000,000
Accumulated depreciation 2,250,000
Equipment 9,200,000
Gain on sale of equipment 1,050,000
Revaluation surplus (2,200,000-220,000) 1,980,000
Retained earnings 1,980,000
Cherry Company
Required1 Debit Credit
Building 10,000,000
Accumulated depreciation 4,000,000
Revaluation surplus 6,000,000
Required2
Depreciation (13,000,000/5)
Accumulated depreciation
Required3
Revaluation surplus
Retained earnings (6,000,000/5)
Grape Company
Replacement Required a
Cost Cost Appreciation Building
Building 3,000,000 5,000,000 2,000,000
Accumulated depreciation -20% 600,000 4,000,000 400,000
2,400,000 1,000,000 1,600,000
Required b
Accumulated depreciation on cost (3,000,000 x 20%) 600,000 Building
Retained earnings
Life of asset (100% / divided by 4 %) 25 years
Percent of accumulated depreciation (5 years/25) 20%
Required c
Gross replacement cost (4,000,000/80%) 5,000,000 Depreciation (4,00
Accumulated depreciation on replacement cost (5,000,000 x 20 %) 1,000,000
Required d
Revaluation surplu
Debit Credit
Building 2,000,000
Accumulated depreciation 400,000
Revaluation surplus 1,600,000
Building 1,000,000
Retained earnings 1,000,000
Accumulated depreciation 400,000
Revaluation surplus 1,600,000
Depreciation (4,000,000/20) 200,000
Accumulated depreciation 200,000
Revaluation surplus 80,000
Retained earnings (1.600,000/20) 80,000
Epitome Company
Replacement
Cost Cost Appreciation Required a
Land 5,000,000 10,000,000 5,000,000
Building 25,000,000 45,000,000 20,000,000
Accumulated depreciation
(25,000,000 x 3/25) 3,000,000
(45,000,000 x 3/25) 5,400,000 2,400,000
22,000,000 39,600,000 17,600,000
Required b
Machinery 10,000,000 15,000,000 5,000,000
Accumulated depreciation
(10,000,000 x 3/5) 6,000,000
(15,000,000 x 3/5) 9,000,000 3,000,000
4,000,000 6,000,000 2,000,000
Equipment 3,000,000 4,200,000 1,200,000
Accumulated depreciation
(3,000,000 x 3/10) 900,000
(4,200,000 x 3/10) 1,260,000 360,000
2,100,000 2,940,000 840,000
Required c
Required a Debit Credit
Land 5,000,000
Building 20,000,000
Machinery 5,000,000
Equipment 1,200,000
Accumulated depreciation building 2,400,000
Accumulated depreciation - machinery 3,000,000
Accumulated depreciation equipment 360,000
Revaluation surplus 25,440,000
Required b
Depreciation 5,220,000
Accumulated depreciation-building 1,800,000
Accumulated depreciation-machinery 3,000,000
Accumulated depreciation equipment 420,000
Building:
Cost (22,000,000/22) 1,000,000
Appreciation (17,600,000/22) 800,000 1,800,000
Machinery:
Cost (4,000,000/2) 2,000,000
Appreciation (2,000,000/2) 1,000,000 3,000,000
Equipment:
Cost (2,100,000/7) 300,000
Appreciation (840,000/7) 120,000 420,000
Total depreciation 5,220,000
Required c
Revaluation surplus 1,920,000
Retained earnings (800,000+1,000,000-120,000) 1,920,000
Required d
Property, plant and equipment (at revalued amounts):
Land 10,000,000
Building 45,000,000
Machinery 15,000,000
Equipment 4,200,000
Total 74,200,000
Less: Accumulated depreciation 20,880,000
Carrying amount 53,320,000
The following disclosure should be made in the notes to financial statements:
Replacement
Cost Cost
Land 5,000,000 10,000,000
Building 25,000,000 45,000,000
Machinery 10,000,000 15,000,000
Equipment 3,000,000 4,200,000
Total 43,000,000 74,200,000
Less: Accumulated depreciation 13,200,000 20,880,000
Carrying amount 29,800,000 53,320,000
Schedule of accumulated depreciation
Replacement
Cost Cost
Land 4,000,000 7,200,000
Machinery 8,000,000 12,000,000
Equipment 1,200,000 1,680,000
13,200,000 20,880,000