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 $140,000. Assuming this is the first year of using the revaluation model, which of the following amounts will be booked?
A)$60,000 debit to profit and loss.
B)$60,000 credit to profit and loss.
C)$60,000 debit to OCI.
D)$60,000 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 $140,000. Assuming this is the first year of using the revaluation model, which of the following amounts will be booked?
A)$60,000 debit to profit and loss.
B)$60,000 credit to profit and loss.
C)$60,000 debit to OCI.
D)$60,000 credit to OCI.

Quizplus · Accepted Answer

Under the revaluation model, any increase in fair value is recognized in OCI (other comprehensive income) rather than in the profit and loss account. The increase in value is debited to the asset account, and the same amount is credited to the revaluation surplus account (part of OCI). Therefore, in this case, the revaluation surplus would be $60,000 ($140,000-$80,000), and it would be credited to OCI.

Wilson Inc Wishes to Use the Revaluation Model for This