Wilson Inc wishes to use the revaluation model for this property: The fair value for the property is $140,000. Using straight-line depreciation and assuming that the property has a remaining depreciable life of 5 years, how much depreciation expense would be recorded in the year subsequent to the revaluation?
A)$16,000 debit
B)$16,000 credit
C)$28,000 credit
D)$28,000 debit

Question

Wilson Inc wishes to use the revaluation model for this property:  The fair value for the property is $140,000. Using straight-line depreciation and assuming that the property has a remaining depreciable life of 5 years, how much depreciation expense would be recorded in the year subsequent to the revaluation?
A)$16,000 debit 
B)$16,000 credit 
C)$28,000 credit 
D)$28,000 debit

Quizplus · Accepted Answer

Under the revaluation model, depreciation is based on the revalued amount less the residual value over the remaining useful life. Therefore, the depreciation expense for the year subsequent to the revaluation is calculated as follows:
Revalued Amount = $140,000
Depreciable Amount = $140,000 - $0 (assumed residual value) = $140,000
Annual Depreciation = Depreciable Amount / Remaining Useful Life = $140,000 / 5 = $28,000
Since the question asks for the expense recorded, we need to use the debit balance to record the expense, so the answer is D) $28,000 debit.

Wilson Inc Wishes to Use the Revaluation Model for This