Question

Alice Ltd acquired land in 2019 for a cash payment of $240 000. On 30 June 2021, Alice Ltd revalued that land to $340 000. The company income tax rate is 30%,

Required:
Prepare general journal entries for recognizing the tax effect of revaluation.

Answer 1

Journal entries:

Date	Account Titles and Explanation	Debit	Credit
2019	Land	$240,000
	Cash		$240,000
	(To record the purchase of land by cash)
June 30th, 2021	Land	$100,000
	Revaluation Gain ($340,000 - $240,000)		$100,000
	(To record the appreciation of land)
June 30th, 2021	Income Tax Expense	$30,000
	Income Tax Payable ($100,000*30/100)		$30,000
	(To record the income tax on the revaluation gain)