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. Assuming this is the first year of using the revaluation model, what amount would be booked to profit and loss if Wallace chooses to use the elimination method to record the revaluation?
A)$20,000 debit.
B)$20,000 credit.
C)$70,000 debit.
D)$80,000 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. Assuming this is the first year of using the revaluation model, what amount would be booked to profit and loss if Wallace chooses to use the elimination method to record the revaluation?
A)$20,000 debit.
B)$20,000 credit.
C)$70,000 debit.
D)$80,000 credit.

Quizplus · Accepted Answer

If Wallace chooses to use the elimination method, the carrying amount of the building will be reduced to its fair value of $60,000. This means that there will be a loss of $20,000 ($80,000 - $60,000). Since this is the first year of using the revaluation model, this loss will be booked to profit and loss as a debit. Therefore, the correct answer is A) $20,000 debit.

Wallace Inc Wishes to Use the Revaluation Model for This