ABC Ltd is in the business of providing management consultation services in Parn

Question

ABC Ltd is in the business of providing management consultation services in Parnell area. ABC bought a property on 1 July 2012 for a cost of $1,500,000. The property consists of land and building. The value of the land is $800,000 at time of purchase. The property is used as offices and seminar rooms. ABC renovates the property in order to make it suitable for its operation. The cost of renovation is $80,000. The renovation is completed in 2 months after the purchase. ABC has a balance date of 30 June.

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Cost of Property = 1500000 (Purchase Cost) + 80000 (Cost of Renovation) = 1580000

Part 2:

Cost of Building = 780000

Less Accumulated Depreciation = 40000

Value of Property (30 June 2013) = 740000

Value of Land after Revaluation = 900000

Value of Building after Revaluation = 800000

Journal Entries:

Land Dr. (900000 - 800000)100000

Revaluation Surplus Cr. 100000

Building Dr. (800000 - 740000) 60000

Revaluation Surplus Cr. 60000

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects