Question

At 30 June 2020, an entity holds a block of land from which it generates revenue by leasing it to agricultural enterprises. The land has a carrying amount of $2.5 million. An independent market appraisal has valued the land at $2.36 million but costs to dispose of the land are estimated at $100 000. The value in use of land is determined to be $2.33 million.

Required

1. Determine the recoverable amount of the land.

2. Prepare the appropriate journal entry to record any impairment loss that should be recognised. Suppose now that this same block of land was carried under the revaluation model.

3. Prepare the journal entry to record any necessary adjustment assuming there had been no prior revaluations.

4. Prepare the journal entry to record any necessary adjustment assuming there had been a prior revaluation increase of $200 000.

5. Prepare the journal entry to record any necessary adjustment assuming there had been a prior revaluation increase of $120 000.

Answer 1

Answer 1
FV - Cost of Disposal = $2.36 Milions - $100,000 = $2.26 million
VIU = $2.33 million
Therfore, RA = $2.33 million (VIU)
Answer
Journal Entry
Date	Particulars	Dr. Amt	Cr. Amt
	Cost Model
2	Impairment Loss	170,000.00
	Accumulated Impairment Losses - Land		170,000.00
	Revaluation Model
3	Revaluation Loss	170,000.00
	Land		170,000.00
4	Revaluation Surplus - Land	170,000.00
	Land		170,000.00
5	Revaluation Surplus	120,000.00
	Revaluation Loss	50,000.00
	Land		170,000.00