Question

(Revaluations) Wang Ltd. owns land(cost HK$200,000) for which it uses revaluation accounting. It has the following information related to this asset, the only land asset that Wang owns.

Date - Fair value

January 1,2018  - HK$200,000

December 31,2018 - 215,000

December 31,2019 - 185,000

December 31,2020 - 205,000

Instructions:

a) Prepare all entries related to the land for 2018.

b) Determine the amounts to be reported by Wang at December 31, 2019 and 2020, as Land, Other Comprehensive Income, Impairment Loss, and Accumulated Other Comprehensive Income.

c) Prepare the entry for any revaluation adjustments at December 31, 2019 and 2020.

d) Prepare the entries for the sale of the property by Wang on January 15, 2021, for HK$220,000.

Answer 1

Note:- The below given treatment are based on IFRS 16. All revaluation are guided by this chart prepared on guidance of IFRS 16.

a.)

Date	Particulars	Debit	Credit
31-Dec-18	Land	15000
	To Revaluation Reserve (OCI)	15000
	(Being land revalued and income booked to OCI.)

b.)

Date	Land	Other Comprehensive Income	Impairment Loss	Accumulated Other Comprehensive Income./ Revaluation Reserve
31-Dec-18	215000	15000	0	15000
31-Dec-19	185000	0	15000	0		[ Downward revaluation is first setoff against earlier revaluation reserve by 15000 and rest is booked as Impairment Loss of 15000.]
31-Dec-20	205000	20000	0	20000		[ Because of earlier upward revalued, all gain booked to OCI. - IFRS 36.119 ]

c.)

Date	Particulars	Debit	Credit
31-Dec-19	Revaluation Reserve (OCI)	15000
	Profit & Loss (Impairment Loss)	15000
	To Land	30000
	(Being land revalued and OCI, Imparment Loss booked.)
31-Dec-20	Land	20000
	To Revaluation Reserve (OCI)	20000
	(Being land revalued and income booked to OCI.)

d.)

Date	Particulars	Debit	Credit
15-Jan-21	Land	15000
	To Revaluation Reserve (OCI)	15000
	(Being land revalued and income booked to OCI.)
15-Jan-21	Cash	220000
	To Land	220000
	(Being Land Sold.)
15-Jan-21	Revaluation Reserve (OCI)	45000
	To Retained Earnings	45000
	(Being Revaluation income now realised and transferred to retained earnings.