A partnership on admitting a new member, revalued the business' land and building from N30,000 to N70,000. The difference of N40,000 should be ____
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Correct Answer: Option C
Explanation:
When a partnership admits a new member and revalues its assets (like land and buildings), any increase or decrease in the asset's value is recorded in a revaluation account.
Here’s how it works:
Revaluation of assets: The land and building value has been increased from N30,000 to N70,000, which is an increase of N40,000.
Asset Revaluation Account: This account is used to record changes in the value of assets when they are revalued.
The increase in value (N40,000) will be credited to the asset revaluation account because it represents a gain on the asset.
After the revaluation, the new value (N70,000) will be reflected in the land and building account.
When a partnership admits a new member and revalues its assets (like land and buildings), any increase or decrease in the asset's value is recorded in a revaluation account.
Here’s how it works:
Revaluation of assets: The land and building value has been increased from N30,000 to N70,000, which is an increase of N40,000.
Asset Revaluation Account: This account is used to record changes in the value of assets when they are revalued.
The increase in value (N40,000) will be credited to the asset revaluation account because it represents a gain on the asset.
After the revaluation, the new value (N70,000) will be reflected in the land and building account.