ACC101 (August & October 2021 Semester, Online Examination) Page 11 Question 4A (14 marks) BEST CONSULT Ltd is a law firm specialized in providing litigation services. Its financial year end is 30 September each year. On 01 October 2016, it paid $800,000 cash for the purchase of land and $2,000,000 cash for building. The company feels that the land had a perpetual life and need not depreciate. At the time of acquisition of the building, it was estimated to have a remaining useful economic life of 40 years and no residual value. BEST CONSULT Ltd adopted the straight-line depreciation method for its building throughout. Owing to expansion of the law firm, on 01 October 2021, after exactly 5 years of usage, BEST CONSULT Ltd decided to extend the building and this would increase its office space substantially. BEST CONSULT Ltd paid $350,000 cash for the extension of building. It had decided to capitalize this expenditure. The whole building now has a 35year life remaining and no residual value. Frequent repairs and maintenance of the building have been carried out to make the building look beautiful and elegant. On 2 November 2021, BEST CONSULT Ltd paid $125, by cheque, to replace a light bulb at the porch of the building. (Ignore Goods and Services Tax) REQUIRED: (i) Prepare the journal entry for the 01 October 2016 transaction. (2 marks) (ii) Prepare the journal entry for the 30 September 2017 depreciation expense of the building for the financial year. (2 marks) (iii) Prepare the journal entry for the 2 November 2021 transaction. (2 marks) (iv) Calculate the depreciation expense of the building for the year ended 30 September 2022. (Show your workings clearly) (4 marks) (v) BEST CONSULT Ltd was considering revaluing its land and building every five years using an external professional valuer. Discuss one advantage and one disadvantage of undertaking this revaluation. (4 marks)