Question & Answer: Canadian Accounting: During 20×4, a company purchased Land 1 at a cost of $3,…..

Canadian Accounting:

During 20×4, a company purchased Land 1 at a cost of $3,500,000 and Land 2 at a cost of $2,500,000. On July 1, 20×5, the company exchanged 20% of Land 2 for equipment. The company properly recorded these transactions.

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The company decided to use the revaluation model for land. The fair value of the two parcels of land at December 31, 20×5 were $3,900,000 for Land 1 and $1,800,000 for Land 2. The unadjusted trial balance as at December 31, 20×5 shows a balance of zero in both the OCI – Revaluation gain on land and the A*OCI – Revaluation gain on land accounts.

Required – Prepare the adjusting journal entries relating to the revaluation of Land 1 and Land 2 at December 31, 20×5.

Expert Answer

 

Journal

No. Account Name Debit Credit
1. Land 1 ($3900000-$3500000) $400000
OCI – Revaluation gain on land $400000
(To record revaluation gain on Land 1)
2. OCI – Revaluation loss on land ($2500000-$1800000) $700000
Land 2 $700000
(To record revaluation loss on Land 2)

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