Candy Company owns a building that cost $700,000. At December 31, 2008, the remaining useful life of a particular building is 30 years; the accumulated depreciation on the building is $200,000 so its carrying value is $500,000. Candy Company wishes to revalue all of its building on the December 31, 2008 balance sheet. The fair value is currently $900,000.
a) Prepare the necessary journal entry to carry the building at fair value. Assume Candy Company accounts for accumulated depreciation by eliminating the accumulated depreciation against the gross carrying amount of the asset and restating the net amount to the revalued amount of the asset.
b) What is the depreciation charge on the building in 2009? After this entry is recorded what are the amounts in the Building and the Accumulated Depreciation-Building accounts.
c) Assume the entry in (b) was posted. At December 31, 2009, Candy estimates that the fair value of the building is now $850,000. What is the amount of the adjustment for the change in fair value? Prepare the journal entry to record this adjustment.