NAIA Company acquired a machine on January 1, 2016, at a cost of P1,500,000. It was expected to

have a useful economic life of 10 years. NAIA uses the straight-line method in depreciating its

machinery and equipment and reports on a calendar year basis.

On December 31, 2018, the machine was appraised as having a gross replacement cost of

P2,700,000. NAIA applies the revaluation model in valuing this class of property, plant, and

equipment after its initial recognition.

Requirements:

1. How much is the depreciation expense in 2019?

2. How much is the balance of the revaluation surplus account on December 31, 2019, assuming that

the company uses the "Piecemeal basis" of transferring the revaluation surplus to retained

earnings?

3. What is the carrying value of the machine on December 31, 2019?

4. Assuming that the machinery was sold on December 31, 2020, at P1,400,000, what is the gain or

loss to be recognized in the profit or loss for 2020 and how much in revaluation surplus should be

transferred as a "lump-sum to retained earnings?

5. Assuming that the fair market value of the equipment is P2.45M December 31, 2018, what is the

carrying value of the revaluation surplus on December 31, 2019, under "Piecemeal basis" of

transferring the revaluation surplus to retained earnings?

Answer rating: 100% (QA)

To solve the given accounting questions I will calculate the necessary values step by step 1 Depreciation Expense in 2019 Since NAIA uses the straightline method the annual depreciation expense is cal... View the full answer