Wilson Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | }
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $40,000. Assuming this is the first year of using the revaluation model, which of the following amounts will be booked?
A)$40,000 debit to profit and loss.
B)$40,000 credit to profit and loss.
C)$40,000 debit to OCI.
D)$40,000 credit to OCI.

Question

Wilson Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $40,000. Assuming this is the first year of using the revaluation model, which of the following amounts will be booked?
A)$40,000 debit to profit and loss.
B)$40,000 credit to profit and loss.
C)$40,000 debit to OCI.
D)$40,000 credit to OCI.

Quizplus · Accepted Answer

Under the revaluation model, if an asset's carrying amount is decreased as a result of a revaluation, the decrease should be recognized in profit or loss. Since the fair value ($40,000) is below the net carrying value ($80,000), a $40,000 debit (expense) should be recognized in profit and loss to reflect the decrease in value.

Wilson Inc Wishes to Use the Revaluation Model for This