Question
Answer the following question: Madelyn Cline Company (MCC) purchases land and decides to use the revaluation model to account for land. The company has a
Answer the following question:
Madelyn Cline Company (MCC) purchases land and decides to use the revaluation model to account for land. The company has a December 31 year end and follows IFRS.
May 1, Yr 1 Acquisition $960,000
Dec 31, Yr 1 Fair Value $960,000
Dec 31, Yr 2 Fair Value $1,300,000
Dec 31, Yr 3 Fair Value $1,300,000
Dec 31, Yr 4 Fair Value $1,000,000
Dec 31, Yr 5 Fair Value $860,000
Entries:
May 1, Year 1 Dr Land Cr Cash
Dec 31, Year 1 No entry required
Dec 31, Year 2 Dr Land Cr OCI - Revaluation Surplus
Dec 31, Year 3 No entry required
Dec 31, Year 4 Dr OCI - Revaluation Surplus Cr Land
Dec 31, Year 5 Dr Loss on Revaluation Dr OCI - Revaluation Surplus Cr Land
Question: Why is there a loss recorded in Dec 31, Year 5 when fair value decreased but not when fair valued decreased in December 31, Year 4?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started