Kiely Company Inc. has buildings that cost $1,000,000 with accumulated depreciation of $500,000 on December 31, Year 1. On that date Kiely Company determines that the market value of these buildings is $800,000. Kiely company wishes to carry buildings on the December 31, Year 1 balance sheet at a revalued amount. Kiely Company uses treatment 2 under the revaluation PPE method. Record the necessary journal entries for the elimination of accumulated depreciation and the entry to revalue the building.

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Kiely Company Inc. has buildings that cost $1,000,000 with accumulated depreciation of $500,000 on December 31, Year 1. On that date Kiely Company determines that the market value of these buildings is $800,000. Kiely company wishes to carry buildings on the December 31, Year 1 balance sheet at a revalued amount. Kiely Company uses treatment 2 under the revaluation PPE method. Record the necessary journal entries for the elimination of accumulated depreciation and the entry to revalue the building.

EXPERT ANSWER

DateAccount titleDebitcredit
aAccumulated depreciation500000
Building500000
bBuilding300000
Revaluation surplus/Gain on revaluation300000

*Book value after entry in part a = 1,000,000-500,000 = 500,000

Revaluation surplus = 800000-500000= 300000