Smith & Jones Ltd owns equipment that was purchased for $56,000 and has accumulated depreciation of $14,000. The following market value information was gathered about the equipment:

The equipment has a remaining useful life to the entity of 10 years. What are the appropriate journal entries to record the revaluation under the gross method and the net-amount method?
E) None of the given answers.

Question

Smith & Jones Ltd owns equipment that was purchased for $56,000 and has accumulated depreciation of $14,000. The following market value information was gathered about the equipment:

The equipment has a remaining useful life to the entity of 10 years. What are the appropriate journal entries to record the revaluation under the gross method and the net-amount method?
E) None of the given answers.

Quizplus · Accepted Answer

Under the gross method, the revaluation increase is recorded by debiting the equipment account and crediting revaluation surplus. 
Journal entry:
Equipment - Dr. $10,000
Revaluation surplus - Cr. $10,000

Under the net-amount method, the revaluation increase is recorded by debiting the revaluation surplus account and crediting the accumulated depreciation and equipment accounts. 
Journal entry:
Revaluation surplus - Dr. $10,000
Accumulated depreciation - Cr. $14,000
Equipment - Cr. $24,000

Option A is the correct answer as it represents both the journal entries correctly.

Smith & Jones Ltd Owns Equipment That Was Purchased for $56,000