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Example Q1 A piece of freehold land was acquired for $500,000 cash on 1 January 2016....

Example Q1 A piece of freehold land was acquired for $500,000 cash on 1 January 2016. The land is not subject to depreciation and is revalued at each fiscal year-ending 31 December.

Details about the fair value at each year-end are given below: 31.12. 2016 Fair value $490,000 31.12. 2 017 Fair value $520,000 The land was sold on 1 May 2018 for $550,000.

Required: Prepare all relevant entries relating to the land for the years 2016, 2017 and 2018. Indicate the date next to each entry.

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Answer #1

Answer:

General entry for Land Acquired On 31.12.2016:

Value of the Land:$4,90,000.

Entry:

Particulars Debit Credit
Land a/c $4,90,000
Cash a/c $4,90,000

General Entry for Land Acquired On 31.12.2017:

Value of the Land:$5,20,000.

Entry:

Particulars Debit Credit
Land a/c $5,20,000
Cash a/c $5,20,000

As per question on 1st May 2018 The land was sold

General Entry for Land Sold On 01.05.2018:

Value of the sale of Land: $5,50,000

Particulars

 Debit Credit
Cash a/c $5,50,000
Land a/c $5,50,000
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