Question
ABC Co. has 31 December year-end. On 1 July 20X5, it bought an office building at a cost of $6 million. The building is expected
ABC Co. has 31 December year-end. On 1 July 20X5, it bought an office building at a cost of $6 million. The building is expected to have a useful life of 30 years with no residual value. ABC measures buildings under FRS 16 using cost model with straight-line method of depreciation. On 31 December 20X6, ABC reclassified the building to be investment property. The company has policy of carrying its investment properties at fair value. An impairment assessment on 31 December 20X6 determined the recoverable value based on value in use to be $4.5 million. The fair value on 31 December 20X5 was $4.2 million.
Question:
Illustrate the accounting for this building by preparing journal entries for the year ended 31 December 20X6.
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