The document contains problems related to revaluation of property, plant and equipment. It provides journal entries to record revaluation, subsequent depreciation, and realization of revaluation surplus over the remaining useful life of the assets. The problems cover machinery, equipment, buildings and land. Journal entries are provided to record revaluation based on replacement cost, adjust accumulated depreciation, record subsequent depreciation, and realize revaluation surplus annually.

1. PROBLEMS -
REVALUATION
ACFAR 2132
INTERMEDIATE
ACCOUNTING 1
LEOPOLDO D.
MEDINA, CPA, MSA

3. Problem 1
Steenburgen Company provided the following data pertaining to
a machinery on the date of revaluation:
Cost Replacement cost
Machinery 4,500,000 7,200,000
Accumulated depreciation 900,000
Age of asset 3 years

4. a. What is the original useful life of the
asset?
Accumulated depreciation 900,000
divided by age of asset 3
Annual depreciation 300,000
Depreciable amount 4,500,000 – 0 RV
divided by annual depreciation 300,000
Useful life of asset 15 years

5. Alternatively,
Cost 4,500,000
-Accumulated depreciation 900,000 20 %
Since the asset is already 20% depreciated,
Age of the asset 3 years
divided by 20 %
Useful life of the asset 15 years

6. b. Prepare journal entry to record the
revaluation.
Years
Cost Revalued
amount
Appreciation
Machinery 100 % 15 4,500,000 7,200,000
Replacement
cost
2,700,000
Accum.
Depreciation
20 % 3 900,000 1,440,000 540,000
Carrying
Amount
80 % 12 3,600,000 5,760,000
Depreciated
Rep Cost or
Sound Value
2,160,000
Revaluation
Surplus

7. Machinery 2,700,000
Accumulated depreciation 540,000
Revaluation surplus 2,160,000

8. c. Prepare journal entry to record the annual
depreciation subsequent to revaluation.
Depreciated RC or Sound Value 5,760,000
divided by remaining life 12 years
Subsequent annual depreciation 480,000
Depreciation 480,000
Accumulated depreciation 480,000

9. d. Prepare journal entry to record the piecemeal
realization of the revaluation surplus.
Revaluation surplus 2,160,000
divided by remaining life 12 years
Piecemeal realization of RS 180,000
Revaluation surplus 180,000
Retained earnings 180,000

10. Problem 2
Stapleton Company provided the following data:
Cost Replacement cost
Equipment 3,000,000 4,800,000
Accumulated depreciation 750,000
Age of the asset 5 years

11. a. What is the original useful life of the
equipment?
Accumulated depreciation 750,000
divided by age of asset 5
Annual depreciation 150,000
Depreciable amount 3,000,000 – 0 RV
divided by annual depreciation 150,000
Useful life of asset 20 years

12. Alternatively,
Cost 3,000,000
-Accumulated depreciation 750,000 25 %
Since the asset is already 25% depreciated,
Age of the asset 5 years
divided by 25 %
Useful life of the asset 20 years

13. b. Prepare journal entry to record the
revaluation.
Years
Cost Revalued
amount
Appreciation
Equipment 100 % 20 3,000,000 4,800,000
Replacement
cost
1,800,000
Accum.
Depreciation
25 % 5 750,000 1,200,000 450,000
Carrying
Amount
75 % 15 2,250,000 3,600,000
Depreciated
Rep Cost or
Sound Value
1,350,000
Revaluation
Surplus

14. Equipment 1,800,000
Accumulated depreciation 450,000
Revaluation surplus 1,350,000

15. c. Prepare journal entry to record the annual
depreciation after revaluation.
Depreciated RC or Sound Value 3,600,000
divided by remaining life 15 years
Subsequent annual depreciation 240,000
Depreciation 240,000
Accumulated depreciation 240,000

16. d. Prepare journal entry to record the piecemeal
realization of the revaluation surplus.
Revaluation surplus 1,350,000
divided by remaining life 15 years
Piecemeal realization of RS 90,000
Revaluation surplus 90,000
Retained earnings 90,000

17. Problem 3
Hunt Company provided the following data on the date of
revaluation:
Building at original cost 5,000,000
Building, at fair value 6,000,000
Accumulated depreciation – cost
40 – year life and 10 years expired 1,250,000

18. a. Prepare journal entries for the current year
under the proportional approach.
Years
Cost Revalued
amount
Appreciation
Building 100 % 40 5,000,000 8,000,000
Grossed up
amount
3,000,000
Accum.
Depreciation
25 % 10 1,250,000 2,000,000 750,000
Carrying
Amount
75 % 30 3,750,000 6,000,000
Fair value
(given)
2,250,000
Revaluation
Surplus

19. Building 3,000,000
Accumulated depreciation 750,000
Revaluation surplus 2,250,000
_____________________________________________________________________
Depreciation 200,000
Accumulated depreciation 200,000 6M / 30 yrs = 200 T
Revaluation surplus 75,000
Retained earnings 75,000 2.25M / 30 = 75 T

20. b. Prepare journal entries for the current year
under the elimination approach.
Accumulated depreciation 1,250,000
Building 1,250,000
Building 2,250,000
Revaluation surplus 2,250,000
_____________________________________________________________________
Depreciation 200,000
Accumulated depreciation 200,000 6M / 30 yrs = 200 T
Revaluation surplus 75,000
Retained earnings 75,000 2.25M / 30 = 75 T

21. Problem 4
Ashcroft Company provided the following data related to an
equipment on the date of revaluation:
Cost Replacement cost
Equipment 6,500,000 9,200,000
Residual value 500,000 200,000
Useful life in years 12
Age of the machinery 2
Accumulated depreciation ?

22. a. Prepare journal entries for the current year.
Years
Cost Revalued
amount
Appreciation
Equipment 100 % 12 6,500,000 9,200,000 2,700,000
Residual value 500,000
200,000 200,000 0
Depreciable
Amount
6,000,000
6,300,000 9,000,000 2,700,000
Accum.Depn 16.67% 2 1,000,000 1,500,000 500,000
Carrying Amt 83.33% 10 5,000,000
5,300,000 7,500,000
Depreciated RC
less RV
2,200,000
RS

23. Equipment 2,700,000
Accumulated depreciation 500,000
Revaluation surplus 2,200,000
_______________________________________________________________________
Depreciation 750,000
Accumulated depreciation 750,000 7.5M/ 10 = 750 T
Revaluation surplus 220,000
Retained earnings 220,000 2.2M / 10 = 220 T

24. b. What is journal entry for the sale of the equipment
for P8,000,000, one year after revaluation?
Cost 9,200,000 9,200,000
-AD 1,500,000 + 750,000 = 2,250,000
CA 7,700,000 6,950,000
vs Proceeds 8,000,000
Gain 1,050,000
___________________________________________________________________
Cash 8,000,000
Accumulated depreciation 2,250,000
Equipment 9,200,000
Gain on sale 1,050,000

25. Problem 5
Huston Company acquired a building on January 1, 2017 at a cost
of P20,000,000. The building has an estimated useful life of 6 years
and residual value P2,000,000.
The building was revalued on January 1, 2020 and the revaluation
revealed replacement cost of P30,000,000, residual value of
P4,000,000 and revised useful life of 8 years.

26. a. Prepare journal entry to record the revaluation.
Years
Cost Revalued
amount
Appreciation
Building 100 % 6 20,000,000 30,000,000 10,000,000
Residual value 2,000,000
4,000,000 4,000,000 0
Depreciable
Amount
18,000,000
16,000,000 26,000,000 10,000,000
Accum.Depn 50% 3 9,000,000 13,000,000 4,000,000
Carrying Amt 50% 3 9,000,000
7,000,000 13,000,000
Depreciated RC
less RV
6,000,000
RS

27. Building 10,000,000
Accumulated depreciation 4,000,000
Revaluation surplus 6,000,000

28. b. Prepare journal entry to record
annual depreciation for 2020.
Depreciation 2,600,000
Accumulated depreciation 2,600,000
13 M / 5* = 2.6 M
* 8 – 3 = 5 remaining useful life
What is the carrying amount of building one year after revaluation?
CA after recording revaluation 17,000,000
-Subsequent depreciation 2,600,000
CA one year after revaluation 14,400,000

29. c. Prepare journal entry to record the piecemeal
realization of the revaluation surplus.
Revaluation surplus 1,200,000
Retained earnings 1,200,000
6 M / 5 yrs remaining life = 1.2 M
What is the balance of Revaluation surplus one year after revaluation?
Revaluation surplus (date of revaluation) 6,000,000
-Piecemeal realization of RS in current year 1,200,000
Balance of RS 4,800,000

30. Problem 6
On January 1, 2015, Wiest Company purchased a new building
at a cost of P3,000,000.
Depreciation was computed on the straight line basis at 4% per
year. On January 1, 2020, the building was revalued at a fair
value of P4,000,000. To record the revaluation, the following
journal entry was made.
Building 1,000,000
Retained earnings 1,000,000

31. a. What journal entry should have been made
to record the revaluation?
Years
Cost Revalued
amount
Appreciation
Building 100 % 25 3,000,000 5,000,000
Grossed up
amount
2,000,000
Accum.
Depreciation
20 % 5 600,000 1,000,000 400,000
Carrying
Amount
80 % 20 2,400,000 4,000,000
Fair value
(given)
1,600,000
Revaluation
Surplus

32. Building 2,000,000
Accumulated depreciation 400,000
Revaluation surplus 1,600,000

33. b. What journal entry is necessary to
correct the accounts?
Building 1,000,000
Retained earnings 1,000,000
Accumulated depreciation 400,000
Revaluation surplus 1,600,000

34. c. Prepare journal entry for the
subsequent annual depreciation.
100 % / 4 % = 25 years
(5)
20 remaining life
4,000,000 / 20 = 200,000
Depreciation 200,000
Accumulated depreciation 200,000

35. d. Prepare journal entry for the piecemeal
realization of the revaluation surplus.
1.6 M / 20 yrs = 80 T
Revaluation surplus 80,000
Retained earnings 80,000

36. Problem 7
On January 1, 2017, Dukakis Company acquired the following
property, plant and equipment :
Cost Useful life
Land 5,000,000
Building 25,000,000 25
Machinery 10,000,000 5
Equipment 3,000,000 10

37. At the beginning of 2020, a revaluation of property, plant and equipment was
made by professionally qualified valuers. While no change in the useful life of
the assets was indicated, it was ascertained that replacement cost of the
assets had increased by the following percentage:
Land 100%
Building 80%
Machinery 50%
Equipment 40%
It was authorized that such revaluation be recorded in the accounts and that
depreciation be recorded on the basis of revalued amount.

38. a. Prepare journal entry to record the
revaluation on January 1, 2020.
Cost Revalued
amount
Appreciation
Land 5,000,000 10,000,000 5,000,000
*5M x 100 %

39. Years
Cost Revalued
amount
Appreciation
Building 100 % 25 25,000,000 45,000,000 20,000,000
25M x 80%
Accum.
Depreciation
12 % 3 3,000,000 5,400,000 2,400,000
Carrying
Amount
88 % 22 22,000,000 39,600,000 17,600,000
Revaluation
Surplus

40. Years
Cost Revalued
amount
Appreciation
Machinery 100 % 5 10,000,000 15,000,000 5,000,000
10M x 50%
Accum.
Depreciation
60 % 3 6,000,000 9,000,000 3,000,000
Carrying
Amount
40 % 2 4,000,000 6,000,000 2,000,000
Revaluation
Surplus

41. Years
Cost Revalued
amount
Appreciation
Equipment 100 % 10 3,000,000 4,200,000 1,200,000
3M x 40%
Accum.
Depreciation
30 % 3 900,000 1,260,000 360,000
Carrying
Amount
70 % 7 2,100,000 2,940,000 840,000
Revaluation
Surplus

42. Land 5,000,000
Building 20,000,000
Machinery 5,000,000
Equipment 1,200,000
Accum. Depn – Building 2,400,000
Accum. Depn – Machinery 3,000,000
Accum. Depn – Equipment 360,000
Revaluation surplus 25,440,000

43. b. Prepare journal entry to record the
depreciation for the current year.
Depreciation :
Building 39.6 M / 22 yrs = 1.8 M
Machinery 6 M / 2 yrs = 3.0 M
Equipment 2.94M/ 7 yrs = 420 T
___________________________________________________
Depreciation 5,220,000
Accum. Depn – Building 1,800,000
Accum. Depn – Machinery 3,000,000
Accum. Depn – Equipment 420,000

44. c. Prepare journal entry to record the piecemeal
realization of the revaluation surplus.
Piecemeal realization
RS (Building) : 17.6 M / 22 yrs = 800 T
RS (Machinery) : 2 M / 2 yrs = 1 M
RS (Equipment) : 840T / 7 yrs = 120 T
1920 T
________________________________________________________________
Revaluation surplus 1,920,000
Retained earnings 1,920,000

45. d. Present the assets in the statement of
financial position on December 31, 2020.
Noncurrent assets
Property, plant and
equipment, net Note # 53,320,000

46. Notes to Financial Statements
Note # Property, plant and equipment, net
Cost Accumulated
depreciation
Carrying
Land 10,000,000 0 10,000,000
Building 45,000,000 7,200,000 37,800,000
Machinery 15,000,000 12,000,000 3,000,000
Equipment 4,200,000 1,680,000 2,520,000
Total 74,200,000 20,880,000 53,320,000

47. Problem 8
On January 1, 2020, Davis Company reported the following account balances
relating to property, plant and equipment:
Land 2,000,000
Building 15,000,000
Accumulated depreciation 3,750,000
Machinery 3,000,000
Accumulated depreciation 1,500,000
Assets have been carried at cost since acquisition. All assets were acquired on
January 1, 2010. The straight line method is used.

48. On January 1,2020, the entity decided to revalue the
property, plant and equipment.
On such date, competent appraisers submitted the
following:
Replacement cost
Land 5,000,000
Building 25,000,000
Machinery 5,000,000

49. a. What is the revaluation surplus on
January 1,2020?
Cost Revalued
amount
Appreciation
Land 2,000,000 5,000,000
Replacement
cost
3,000,000
RS

50. Years
Cost Revalued
amount
Appreciation
Building 100 % 40 15,000,000 25,000,000
Replacement
cost
10,000,000
Accum.
Depreciation
25 % 10 3,750,000 6,250,000 2,500,000
Carrying
Amount
75 % 30 11,250,000 18,750,000
Depreciated
replacement cost
7,500,000
Revaluation
Surplus

51. Years
Cost Revalued
amount
Appreciation
Machinery 100 % 20 3,000,000 5,000,000
Replacement cost
2,000,000
Accum.
Depreciation
50 % 10 1,500,000 2,500,000 1,000,000
Carrying
Amount
50 % 10 1,500,000 2,500,000
Depreciated
replacement cost
1,000,000
Revaluation
Surplus

52. Revaluation Surplus January 1, 2020
Land 3,000,000
Building 7,500,000
Machinery 1,000,000
Total 11,500,000

53. b. What is the depreciation for 2020?
2020 Depreciation of
Building 18.75 M / 30 = 625,000
Machinery 2.5 M / 10 = 250,000
875,000

54. c. What is the revaluation surplus on
December 31,2020?
Land Building Machinery TOTAL
Revaluation
surplus Jan 1
3,000,000 7,500,000 1,000,000 11,500,000
Less :
Piecemeal
realization
B: 7.5M/30
M: 1M /10
( 0 )
(250,000)
(100,000) (350,000)
Revaluation
surplus Dec 31
3,000,000 7,250,000 900,000 11,150,000

55. Problem 9
On January 1, 2020, Fricker Company provided the following information
related to the land and building:
Land 50,000,000
Building 450,000,000
Accumulated depreciation – building 75,000,000
There were no additions or disposals during the current year. Depreciation is
computed using straight line over 15 years for building.

56. On June 30, 2020 the land and building were revalued.
Replacement cost Sound value
Land 65,000,000 65,000,000
Building 600,000,000 480,000,000

57. a. What is the revaluation surplus on
June 30,2020?
Cost Revalued
amount
Appreciation
Land 50,000,000 65,000,000
Replacement
cost
15,000,000
RS

58. Years
Cost Revalued
amount
Appreciation
Building 100 % 15 450,000,000 600,000,000
Replacement
Cost
150,000,000
AD
1/1/2020
+ Depn Jan-Jun
450M/15 x 6/12
20 %
3
75,000,000
15,000,000
90,000,000 120,000,000 30,000,000
Carrying
Amount
6/30/2020
80 % 12 360,000,000 480,000,000
Depreciated
replacement cost
120,000,000
Revaluation
Surplus

59. Revaluation surplus, 6/30/2020
on Land 15,000,000
on Building 120,000,000
Total 135,000,000

60. b. What is the depreciation of the
building for 2020?
Depreciation
January 1 to June 30
450 M / 15 x 6/12 15,000,000
July 1 to December 31
480 M / 12 x 6/12 20,000,000
Total 35,000,000

61. c. What is the revaluation surplus on
December 31,2020?
Land Building Total
RS, 6/30/2020 15,000,000 120,000,000 135,000,000
less: Piecemeal
realization-Bldg
120M/12 x 6/12
*6/30/20-12/31/20 (5,000,000) (5,000,000)
RS, 12/31/2020 15,000,000 115,000,000 130,000,000

62. Problem 10
On June 30, 2020, Goldberg Company reported the following
information related to equipment:
Equipment cost 5,000,000
Accumulated depreciation 1,500,000
The equipment was measured using the cost model and depreciated
on a straight line basis over a 10-year period.

63. On December 31, 2020, the entity decided to change the
basis of measuring the equipment from the cost model to
the revaluation model.
On revaluation date, the equipment had a fair value of
P4,550,000 with an expected remaining useful life of 5
years.

64. a. What is the journal entry to record the
revaluation on December 31, 2020?
Years
Cost Revalued
amount
Appreciation
Equipment 100 % 10 5,000,000 7,000,000
4.55 M / 65 %
2,000,000
AD
6/30/2020
+ Depn Jul-Dec
5M/10 x 6/12
35 %
3.5
1,500,000
250,000
1,750,000 2,450,000 700,000
Carrying
Amount
12/31/2020
65 % 6.5*
revised
to 5 yrs
3,250,000 4,550,000
FV (given)
1,300,000
RS

65. Equipment 2,000,000
Accumulated depreciation 700,000
Revaluation surplus 1,300,000

66. b. What is the depreciation for 2020?
Depreciation 2020
Jan 1 to Dec 31, 2020
5,000,000 / 10 500,000

67. c. What is the depreciation for 2021?
Depreciation 2021
Jan 1 to Dec 31, 2021
4,550,000 / 5 910,000

68. d. What is the revaluation surplus on
December 31, 2021?
Revaluation surplus 12/31/2020 1,300,000
Less : Piecemeal realization in 2021
1.3 M / 5 ( 260,000)
Revaluation surplus, 12/31/2021 1,040,000

69. e. If the equipment was sold on January 1, 2022 for
P3,500,000, what is the gain or loss on sale?
Carrying amount
12/31/2020 4,550,000
or
Cost 7,000,000
Less 2021
Depreciation 910,000
Less : Accum Depn
12/31/2021
2.45 M + 910 T
3,360,000
Carrying amount
12/31/2021 3,640,000
Carrying amount
12/31/2021 3,640,000
Selling price 3,500,000 Selling price 3,500,000
Loss on sale 140,000 Loss on sale 140,000

70. Cash 3,500,000
Accumulated depreciation 3,360,000
Loss on sale of equipment 140,000
Equipment 7,000,000

71. Problem 11
On January 1, 2017, the statement of financial position of
Dern Company shows Equipment at a cost of P7,500,000
and Accumulated depreciation of P3,000,000 (10 years
useful life).
On this date, the equipment is revalued at a depreciated
replacement cost or sound value of P7,200,000.

72. On January 1, 2020, 3 years after the first revaluation, the
fair value of the equipment is determined to be
P1,575,000.

73. a. What is the revaluation surplus on January 1, 2017?
Years
Cost Revalued
amount
Appreciation
Equipment 100 % 10 7,500,000 12,000,000
7.2 M / 60 %
4,500,000
Accumulated
depreciation 40% 4 3,000,000 4,800,000 1,800,000
Carrying
Amount
1/1/2017
60% 6 4,500,000 7,200,000
/ 6 yrs
1.2 M
2,700,000
/ 6 yrs
450 T

74. b. What is the revaluation loss on January 1, 2020?
Years
Cost Revalued
amount
Reversal
Equipment 100 % 10 12,000,000 5,250,000
1.575 M / 30 %
(6,750,000)
AD
1/1/17 4.8M
Depn 2017-19
1.2 M x 3 3.6M
70% 7 8,400,000 3,675,000 (4,725,000)
Carrying
Amount
1/1/2020
30% 3
3,600,000 1,575,000
/ 3 yrs
525 T
(2,025,000)
*applied to RS Bal
1.35M
Revaluation loss
675,000

75. c. What is the entry to record the REVERSAL of
revaluation increase on January 1, 2020?
Revaluation surplus 1/1/2017 2,700,000
Less : Piecemeal realization of RS
2.7 M / 6 yrs = 450 T
2017 450,000
2018 450,000
2019 450,000 1,350,000
Revaluation surplus 1/1/2020 1,350,000 *
Therefore, 2,025,000 less 1,350,000, the revaluation loss is 675,000.

76. Accumulated depreciation 4,725,000
Revaluation surplus 1,350,000
Revaluation loss 675,000
Equipment 6,750,000

77. After making this entry, what is the
CA of equipment on 1/1/2020?
Cost 5,250,000
-Accum. Depn 3,675,000
CA 1,575,000