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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?

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