Question

June Rentals Inc. owns a large commercial storage unit that it had purchased on January 1, 2018 for $6 million cash and is accounted for in a separate account, classified as "Storage Property." The company decided to use the revaluation model to account for its storage properties and revalues them when they recognize that a substantial difference exists between net book value and fair value. June uses the straight-line depreciation method over the asset's 40-yr useful life (no residual value).

The asset's fair values were as follows on the following dates:

Dec 31, 2018: $5.85 million; Dec 31, 2019: $6.004 million (substantial difference from NBV); Dec 31, 2020: $5.846 million

On January 3, 2021, June sold building for $5.846 million. June uses IFRS.

Required:

1. Assuming June uses the asset adjustment (elimination) method for revaluation, prepare all required journal entries for 2018, 2019, 2020, and 2021. (Don't forget the depreciation entries.) Also, be sure to record the entry for the sale of the equipment.
2. Assuming June uses the proportional method for revaluation, prepare the required journal entries for 2019 to recognize the revaluation.

Answer 1

1.)			Amount in $ Million
	Date	Account Titles	Debit	Credit
	31-12-2018	Depreciation Expense	0.15
		Accumulated Depreciation		0.15
		( 6/ 40 )
	31-12-2018	No adjustment for Fair value
		( 5.85 - ( 6 -0.15 ) )
	31-12-2019	Depreciation Expense	0.15
		Accumulated Depreciation		0.15
		( 6/ 40 )
		Accumulated Depreciation	0.30
		(0.15 + 0.15 )		0.30
		Storage property
		Storage property	0.304
		Revaluation Surplus		0.304
		(6.004 - ( 6 - 0.30 ) )
	31-12-2020	Depreciation Expense	0.158
		Accumulated Depreciation		0.158
		(6.004 / 38 )
	31-12-2020	No adjustment for Fair value
		( 5.846 - ( 6.004 -0.158 ) )
	03-01-2021	Accumulated Depreciation	0.158
		Storage property		0.158
		Cash	5.846
		Storage property (6.004 - 0.158 )		5.846
			Amount in $ Million
2.)	Date	Account Titles	Debit	Credit
	31-12-2019	Storage property	0.320
		Accumulated Depreciation		0.016
		Revaluation Surplus		0.304

Working:	Amount in $ Million		Amount in $ Million
	Cost before revaluation		Revalued Amount
Storage property	6.00	x 6.004 / 5.70	6.320
Less: Accumulated Depreciation	0.30	x 6.004 / 5.70	0.316
(0.15 x 2 )
Carrying Amount	5.70	x 6.004 / 5.70	6.004