Revaluation Model Mongolia Inc. Owns Equipment That It Purchased on January 1

question 2

Essay

Revaluation model
Mongolia Inc. owns equipment that it purchased on January 1, 2021, for $ 4 million.
The following additional information is available:
Dec. 31, 2021 – Book value (after recording 2021 depreciation): $ 3,600,000
Dec. 31, 2021 – Fair value: $ 4,100,000
The company uses the revaluation model (asset adjustment method) to account for its property, plant, and equipment.
Instructions
Assuming the entry for the current year's depreciation has already been recorded, prepare the entr(ies) to adjust the asset's carrying amount to fair value.

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Definitions:

Absorption Costing

An accounting method that includes both variable and fixed production costs in the cost of goods sold.

Total Gross Margin

A financial metric that measures the difference between revenue and the cost of goods sold, indicating the profitability of sales before deducting operating expenses.

Variable Costing

A method of inventory costing that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of a product.

Net Operating Income

Income from a company's operations, calculated by subtracting operating expenses from operating revenue, excluding income and expenses from non-operating activities.