Arrow Corp purchased a machinery & equipment in 2008 for 5,000,000 and as of December 31, 2014 had recorded accumulated depreciation on the machinery & equipment of 1,000,000. On December 31, 2014, the company conducted its first revaluation when the fair value was 6,500,000.

Under IAS 16, the journal entry recorded on this date would include:

1. a credit to Revaluation Surplus Machinery & Equipment for 2,500,000
2. a debit to Revaluation Surplus Machinery & Equipment for 2,500,000
3. a credit to Loss on Revaluation Machinery & Equipment for 2,500,000
4. a debit to Loss on Revaluation Machinery & Equipment for 2,500,000