Staples Ltd has invested in two parcels of land that are treated as belonging to the same class of assets. The first parcel of land was purchased for $500,000 and has been valued this period at $650,000. The second parcel of land has a carrying value of $340,000 and has been valued this period at $100,000. What is the appropriate journal entry to record the revaluations?
E) None of the given answers.

Question

Quizplus · Accepted Answer

According to IAS 16 Property, Plant and Equipment, when an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount. Therefore, the carrying value of the first parcel of land is increased by $150,000 (revaluation surplus) and the carrying value of the second parcel of land is decreased by $240,000 (revaluation loss). The appropriate journal entry is to debit Land (1st parcel) by $150,000, credit Revaluation surplus by $150,000, debit Revaluation loss by $240,000, and credit Land (2nd parcel) by $240,000.

Staples Ltd Has Invested in Two Parcels of Land That