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

The appropriate journal entry to record the revaluations of land is to debit the increase in fair value to revaluation surplus and credit it by the corresponding asset. For the first parcel of land, the increase in fair value is $150,000 ($650,000 - $500,000). For the second parcel of land, there is a decrease in fair value of $240,000 ($100,000 - $340,000). Therefore, the journal entry would be:
Debit Revaluation Surplus $(90,000)
Credit Land - 1st Parcel $150,000
Credit Land - 2nd Parcel $(240,000)
Option B is the only choice that matches this journal entry. Option A records the debits and credits correctly, but the amounts are incorrect. Option C and D both have incorrect debits and credits. Option E is incorrect because there is a correct answer.

Staples Ltd Has Invested in Two Parcels of Land That