Question

On 31 December 2014, a company acquires land for N$500 000. The land is revalued at...

On 31 December 2014, a company acquires land for N$500 000. The land is revalued at N$530 000 on 31 December 2015 and N$460 000 on 31 December 2016.
The company prepares financial statements to 31 December each year and uses the revaluation model in relation to land.
The correct accounting treatment of each revaluation in the statement of comprehensive income is as follows:

Homework Answers

Answer #1

Part 1) as on 31 December 2015:

Following entry will be passed to record upward revision of asset:

Land------Dr. $30,000

To Revaluation Reserve -- $30,000

***(530,000-500,000)

Please note that revaluation reserve is an equity account and statement of comprehensive income will remain unaffected.

Part 2) as on 31 December 2016:

Following entry will be passed for downward revision:

Revaluation Reserve---Dr. $30,000

Impairment Losses-----Dr. $40,000

To Land--------------------------------------$70,000

**(revaluation reserve will be nullified and extra amount will be debited to Impairment losses)

Please note that Impairment Losses of $40,000 will be taken to statement of comprehensive income as an expense.

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