Wallace Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | }
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 150,000 \
\hline \text { Building Accumulated Depreciation } & 70,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $60,000. What amount would be booked to the "accumulated depreciation" account if Wallace chooses to use the elimination method to record the revaluation?
A)$20,000 debit.
B)$70,000 credit.
C)$70,000 debit.
D)$60,000 credit.

Question

Wallace Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 150,000 \
\hline \text { Building Accumulated Depreciation } & 70,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $60,000. What amount would be booked to the "accumulated depreciation" account if Wallace chooses to use the elimination method to record the revaluation?
A)$20,000 debit.
B)$70,000 credit.
C)$70,000 debit.
D)$60,000 credit.

Quizplus · Accepted Answer

Under the elimination method, the accumulated depreciation is eliminated and a new depreciation charge is calculated based on the revalued amount. Since the fair value of the property is less than the net carrying value, a downward adjustment is necessary. The adjustment is the difference between the carrying value and fair value, which in this case is $80,000 - $60,000 = $20,000. This must be debited to the accumulated depreciation account to eliminate it. Therefore, the correct answer is $20,000 debit, or choice C.

Wallace Inc Wishes to Use the Revaluation Model for This