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On January 1, 2011, Miles Inc.purchased equipment with a cost of €3,570,000, a useful life of
15 years and no salvage value.The company uses straight-line depreciation.At December 31, 2011, an independent appraiser determines that the fair value of the equipment is €3,500,000.Miles prepares financial statements using IFRS and elects to revalue the asset.
-The 2012 (second year) income statement will report depreciation expense for the equipment of

Question

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The correct answer is A.The revaluation gain of €70,000 is recognized in the income statement in the year of revaluation. The carrying amount of the equipment is increased to €3,500,000. The depreciation expense for the second year is calculated as follows:Depreciation expense = (Carrying amount - Salvage value) / Useful life= (€3,500,000 - €0) / 15 years= €233,333

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