Smith Inc wishes to use the revaluation model for this property: The fair value for the property is $150,000. What amount would be booked to the "accumulated depreciation" account if Smith chooses to use the proportional method to record the revaluation?
A)$0
B)$35,000 debit
C)$35,000 credit
D)$70,000 credit

Question

Smith Inc wishes to use the revaluation model for this property:  The fair value for the property is $150,000. What amount would be booked to the "accumulated depreciation" account if Smith chooses to use the proportional method to record the revaluation?
A)$0 
B)$35,000 debit 
C)$35,000 credit 
D)$70,000 credit

Quizplus · Accepted Answer

If Smith Inc chooses to use the proportional method to record the revaluation, the accumulated depreciation is adjusted proportionally to the change in the property's carrying amount. Since we do not know the property's carrying amount or its original cost, we cannot calculate the exact amount of accumulated depreciation to be adjusted. However, we do know that the fair value of the property is $150,000 and that the carrying amount is being increased. This means that the adjustment to the accumulated depreciation account will be a credit (decrease) to offset the increase in the carrying amount. Therefore, the correct answer is C, $35,000 credit, as this represents a decrease in accumulated depreciation to offset the increase in carrying amount resulting from the revaluation.

Smith Inc Wishes to Use the Revaluation Model for This