Question

(a) ABC Company purchased land at a cost of $400,000,000 during 2018. ABC chooses to use the revaluation method of accounting for land. The fair value of the land is as follows at December 31, 2018 2019 and 2020:

2018 - $450,000,000
2019 - $360,000,000
2020 - $385,000,000

Required
(a) Record the journal entries to account for revaluation of the land at 31 December 2018, 2019 and 2020.

(b) Assume ABC Company chooses to apply the cost method for the land and that the above amounts are the recoverable amount of the land at 31 December each year. Record the necessary journal entries to account for the land at 31 December 2018, 2019 and 2020.

Answer 1

A) Journal entries under revaluation method

Date	Account tittles	Debit ($)	Credit ($)
During 2018	Land	400,000,000
	Cash		400,000,000
	[Being land purchased]
December 31st 2018	Land	50,000,000
	Revaluation Reserve		50,000,000
	[ Land re valued ]
December 31st 2019	Revaluation Reserve	50,000,000
	Loss on devaluation of Land	40,000,000
	Land		90,000,000
	[ Land re valued ]
December 31,2020	Land	25,000,000
	Gain on revaluation of Land		25,000,000
	[Revaluation of land took place ]

B) Journal entries under cost method

Date	Account titles	Debit ($)	Credit ($)
During 2018	Land	400,000,000
	Cash		400,000,000
	[ Being land purchased]
December 31,2018	No entry
December 31,2019	Loss on impairment	40,000,000
	Allowance for impairment		40,000,000
	[Impairment loss recognized ]
December 31,2020	Allowance for impairment	25,000,000
	Gain on reversal of impairment		25,000,000
	[ Partial set off impairment loss against gain on impairment reversal ]