Question

XYZ Company purchased a land for $ 1,000,000 during 2017 and chooses the revaluation model in...

XYZ Company purchased a land for $ 1,000,000 during 2017 and chooses the revaluation model in accounting for its land.  

Below are the following information:

Date

Fair Value

December 31, 2017

$ 1,120,000

December 31, 2018

$ 870,000

December 31, 2019

$ 1,110,000

a. How much is the recovery of impairment loss and revaluation gain on land for the year 2019? _____

b. What is the amount of unrealized gain on revaluation - land for the year 2019? ____

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Answer #1

a)

Fair value of land as on December 31, 2018 = 870000

Fair value of land as on December 31, 2019 = 1110000

Total increment in the value of land for the year 2019 =

Fair value of land as on December 31, 2019 - Fair value of land as on December 31, 2018

= 1110000 – 870000 = 240000

Recovery of impairment loss = Purchase price of land – Carrying value of land in the books

= 1000000 – 870000 = 130000

Revaluation gain on land for the year 2019 =

Fair value of land as on December 31, 2019 - Purchase price of land

= 1110000 – 1000000 = 110000

b)

Amount of unrealized gain on revaluation land for the year 2019 =

Fair value of land as on December 31, 2019 - Carrying value of land in the books at the end of 2018

= 1110000 – 870000 = 240000

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