Topic: REVALUATION | ACCOUNTING

The following account balances relating to real properties of Parlays Company appear on the books on December 31, 2014: Land 1 Land 2 Land 3 3,000,000 5,000,000 7,000,000

On January 1, 2015, Parlays Company revalued its land to fair value. Parlays do not have any other assets carried at the revalued amount on this date. The fair value on this date of Land 1, 2 and 3 are P3,500,000, P6,000,000 and P9,000,000, respectively.

Buildings and other facilities located on all three properties are depreciated under the straight-line method of depreciation using a ten-year useful life. On December 31, 2015, Land 2 and the structures on the property were sold for a total amount of P10,000,000.

Questions:

1) What is the initial revaluation surplus? 2) What is the amount revaluation surplus transferred to retained earnings for the year ended December 31, 2015? 3) What is the gain on the sale of land to be recognized at the current year-end?