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Egypt Corp.owns equipment that originally cost $100,000.At December 31, 2017, the equipment's book value (after 2017 depreciation was booked)is $60,000.It is determined that the fair value of the equipment at this date is $90,000.Although Egypt's policy is to apply the revaluation model using the proportionate method, this is the first time the company has done it.
-By how much must the accumulated depreciation account be increased (decreased)at December 31, 2017?

Question

Quizplus · Accepted Answer

The proportionate method of revaluation increases the carrying amount of the asset by the amount of the revaluation gain. The revaluation gain is the difference between the fair value and the book value. In this case, the fair value is $90,000 and the book value is $60,000, so the revaluation gain is $30,000. The accumulated depreciation account must be increased by the same amount, so the answer is A) $20,000.

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