Jordyn Ltd acquired land in 20X9 for a cash payment of $240 000.In 2011,Jordyn Ltd revalued that land to $340 000.If the company income tax rate is 30%,the following entry should be made:

Question

Quizplus · Accepted Answer

When an asset is revalued, an adjustment entry must be made to reflect the increase in value. In this case, the land is revalued from $240,000 to $340,000, so an adjustment of $100,000 is required. Since the income tax rate is 30%, a deferred tax liability (DTL) needs to be recognized for the tax effect of the revaluation. The entry to record this revaluation would be:
Land A/C $100,000
Deferred Tax Liability A/C $30,000
Revaluation Surplus A/C $70,000 (to reflect the increase in value)
Therefore, the correct answer is B.

Jordyn Ltd Acquired Land in 20X9 for a Cash Payment Dr Land $30000 Cr DeferredTax Liability $30000\begin{array} { l l } \text { Dr Land } & \$ 30000 \\\text { Cr DeferredTax Liability } && \$ 30000\end{array} Dr Land Cr DeferredTax Liability ​$30000​$30000​

Jordyn Ltd Acquired Land in 20X9 for a Cash Payment $\begin{array} { l l } \text { Dr Land } & \$ 30000 \\\text { Cr DeferredTax Liability } && \$ 30000\end{array}$