Question

Franco Company uses IFRS and owns a piece of property, plant and equipment that has a historical cost of 5,000,000. At December 31, 2011, the company reported a valuation reserve of 8,365,000 on all assets subject to revaluation. At December 31, 2012, the property, plant and equipment above was appraised at 5,325,000. 22. The valuation reserve at December 31, 2012 will be reported at:___________.
A. 8,040,000 on the Statement of Stockholders' Equity.
B. 8,690,000 in the assets section of the Balance Sheet.
C. 8,690,000 in the stockholders' equity section of the Balance Sheet.
D. 325,000 on the Income Statement.

Answer 1

Answer:

C. 8,690,000 in the stockholders' equity section of the Balance Sheet.

Explanation:

The computation of the valuation reserve reported is shown below:

Given yhat

Valuation reserve reported at the starting year is $8,365,000

Now the upward revaluation amount is

= $5,325,000 - $5,000,000

= $325,000

Now the closing balance of the valuation reserve is

= $8,365,000 + $325,000

= $8,690,000

Hence, the correct option is c.

The same is to be reported in the equity section