Grover Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | }
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$
-According to the table above.The fair value for the property is $20,000. What amount would be booked to the "accumulated depreciation" account if Wilson chooses to use the proportional method to record the revaluation?
A)$0
B)$30,000 debit.
C)$30,000 credit.
D)$60,000 debit.

Question

Grover Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$
-According to the table above.The fair value for the property is $20,000. What amount would be booked to the "accumulated depreciation" account if Wilson chooses to use the proportional method to record the revaluation?
A)$0
B)$30,000 debit.
C)$30,000 credit.
D)$60,000 debit.

Quizplus · Accepted Answer

Under the proportional method, accumulated depreciation is adjusted proportionately with the change in the gross carrying amount of the asset. 
In this case, the property is being revalued downward so the gross carrying amount will decrease by $100,000 (120,000 - 20,000). The accumulated depreciation will be adjusted proportionately by the same rate as the gross carrying amount.

Proportionate rate of accumulated calculation: 
40,000 / 120,000 = 0.333333

New accumulated depreciation balance: 
0.333333 * 100,000 = $33,333.33

To record this adjustment in the accumulated depreciation account, we need to decrease the balance by the difference between the old and new value: 
40,000 - 33,333.33 = $6,666.67.

However, since this is a revaluation decrease, we need to debit the accumulated depreciation account instead of crediting it. Therefore, the final journal entry to record the revaluation under the proportional method would be:
Accumulated depreciation account: $30,000 debit
Revaluation reserve account: $30,000 credit

Grover Inc Wishes to Use the Revaluation Model for This