Mozart Ltd acquired a building for $1.5 million.Management estimates the value of land to be 40% of cost.The building is estimated to have a useful life of 50 years.After 25 years,the property's fair value is estimated at 1.2 million.It is expected that the life of the building will remain the same and salvage value is expected to be $100 000.Which of the following statements is correct at end of year 25 with respect to the revaluation?
A) Net profit will increase by $100 000.
B) Net profit will increase by $120 000.
C) Net profit will decrease by $220 000.
D) Net profit is unaffected as the credit is through the asset revaluation reserve.

Question

Quizplus · Accepted Answer

The Answer of Mozart Ltd acquired a building for $1.5 million.Management estimates the value of land to be 40% of cost.The building is estimated to have a useful life of 50 years.After 25 years,the property's fair value is estimated at 1.2 million.It is expected that the life of the building will remain the same and salvage value is expected to be $100 000.Which of the following statements is correct at end of year 25 with respect to the revaluation?
A) Net profit will increase by $100 000.
B) Net profit will increase by $120 000.
C) Net profit will decrease by $220 000.
D) Net profit is unaffected as the credit is through the asset revaluation reserve.

Mozart Ltd Acquired a Building for $1