Purple Co Ltd purchased an item of land 3 years ago at a cost of $700 000.Two years ago the recoverable value of the land was considered to be $550 000.In the current period the land is revalued and the fair value is now $750 000.What is the treatment of the change in value in each of the periods?

Question

Quizplus · Accepted Answer

Two years ago, there was a decrease in the recoverable value of the land, resulting in a loss of $150,000. In the current period, there is an increase in the fair value of the land, resulting in a gain of $150,000. Additionally, an increase of $50,000 is recognized in the asset revaluation reserve, which represents the difference between the new fair value and the original cost of the land. Therefore, choice A is the correct answer.

Purple Co Ltd Purchased an Item of Land 3 Years