QUESTION:

A company has a building with a carrying value of $500,000 and a fair value of $600,000. What would be the journal entry to record the increase in value?

Answer: The journal entry would be:

Building (asset) - $100,000

Revaluation surplus (equity) - $100,000

Here's the tabulated working calculation for the journal entry to record the increase in value of the building:

To record the increase in value of the building, we need to debit the building account for the increase in value (fair value of $600,000 less the carrying value of $500,000), and credit the revaluation surplus account for the same amount.

The journal entry would be:

Debit building (asset) for $100,000

Credit revaluation surplus (equity) for $100,000

Therefore, the journal entry to record the increase in value of the building would be:

Building (asset) - $100,000

Revaluation surplus (equity) - $100,000